Market Analysis

AAPL Burning

Full disclosure: I’m writing this on an $AAPL device with another one on the table next to me and probably another 4 or 5 scattered across the house. Yup, I love $AAPL devices, wouldn’t have it any other way. The stuff works, it does everything I need and once in a while I upgrade my devices.

$AAPL the stock and the company are burning hot. The stock is up over 40% year to date in 2017, it’s the largest company on the planet with a market cap of over $820B. It’s the leader, it’s the stock that $FANGs want to be when they grow up. Ok I’m being facetious, but let me have a little fun here.

So bottom line on $AAPL: Great company and I love the products, but they are under pressure to deliver a game changer. Today they will launch with much fanfare facial recognition on a new device and some other gimmicks and advances.

Is it enough for me to upgrade? I’m not sure and neither am I sure I’m a relevant market segment.

Indeed in recent years I’ve slowed down my personal upgrade cycle. Why? Because aside from perhaps a better camera or a bit of a better screen etc. all these improvements have been on the margin, meaning I’ve yet to see a compelling application that allows me to do something radically different with either a laptop or a phone. I got a new laptop last summer and it’s nicer, but basically I can do the same things I did 4 years ago. No change.

So now facial recognition? For what? So I can access my phone via my face? I can already access my phone with my thumb, thank you very much. I’m sure the technology behind this new feature is really cool, but it’s not going to change my life or even enhance how I do business. “Oh look I opened my phone with my face”. Yay.

Ok, maybe I’m just not hip.

That said there will be tons of buyers that dig it, there will be an upgrade cycle and people will find a way to in-debt themselves even more to get the latest gadget. Go wild I say.

And this pretty much sums up the bullish case for $AAPL everywhere I look:

“Analyst Katy Huberty goes full tilt on Apple ahead of Tuesday’s iPhone release and raises her bull-case price target from $203 to $253 citing the over emphasized augmented reality offering. ….Huberty comments “Apple is clearly in the lead but the Android ecosystem isn’t far behind – Apple’s ARKit for developers launched in June 2017, and Google’s ARCore Launched in late August 2017.” The analyst first states that ARKit “completes” Apple’s software/hardware ecosystem and generates a first mover advantage for the company. She offers examples such as Pokemon Go video games, measuring things, and solar system exploration to name a few.”

Being a structural bear in this artificial liquidity super cycle I may well occupy my own special corner of the solar system, but personally I need something more compelling to upgrade.

But that’s just me.

Analysts generally are very bullish the stock because of the impending upgrade cycle:

That may all be true, but I’ll offer an additional view perhaps not found anywhere else and that is a general technical perspective:

Everyone buying $AAPL here is doing so 40% above the annual 5 EMA:

Yes I’m using a linear chart, but I’m doing it to highlight a key point. $AAPL is already up over 40% year to date. And it’s not a small cap stock, it’s sitting on over $820B in market cap at this point and this chart above looks overtly parabolic.

Doesn’t mean that $AAPL can’t go higher or that it is going to crash, but it means risk/reward to the upside is poor from my perspective and strength is a tactical sell in my book.

The quarterly chart makes this perspective instantly clear:

Recent highs have come on a negative divergence and if the stock were to reach new highs following its announcement today it also would come on a negative divergence. Additionally the stock has multiple unfilled open gaps below:

Bottom line: In my view the stock has a larger retrace opportunity ahead of it, either from here, or from new highs, but the longer term moving averages are now suggesting that a move toward the $140-147 area and/or the $115-$120 area is technically very feasible within the next 6 months. Indeed a break below $147 could trigger a much larger topping pattern, but that’s academic at this precise moment in time. As long as it stays above the May 2017 highs the stock is probably fine, but a drop below and the larger market has the largest market cap stock correcting to contend with.

Let’s see what they actually deliver today. Maybe I’ll be running to the online store this afternoon. Or maybe I won’t. Either way I’ll keep clicking away on $AAPL devices.

I wish them well.

Categories: Market Analysis

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1 reply »

  1. I never buy the latest gadget because they never offer anything I need immediately. Maybe that’s why I have a savings account.


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