Wednesday, July 26th, 2017

AAPL : What goes up must come down

What goes up must come down

Law of gravity, law of nature and the law of stock market. Nothing stays up forever. You throw a ball it comes down, you have an apple in the tree it falls and higher it is bigger the fall. This is what is happening around a stock named AAPL and the general market.

A blowout stellar earnings on January 25 and the stock gaps up and runs from 454 to 525 in just a matter of 20 days. This surprised many traders whom I know. Most of them were caught on the side lines thinking its too high and too risky to buy. It looked much riskier than it was. The rally continued unabated every day with higher gaps and bigger volumes and the stock became parabolic in an extremely overbought market. The buying climax as seen in text book examples of parabolic charts ended today with midday reversal. AAPL option volume was 1.77 million contracts a record set this year.

The SPX and NDX are both grinding higher in a nice channel as result. AAPL being the largest stock by market cap pulled all of the reluctant and tired members of the market higher lately. Both NDX and SP&500 were grinding higher with apple’s enthusiastic buyers who are mainly well known hedge funds.

But as of today the old axiom what goes up must come down proved true. The buying spree and climax came to a halt as AAPL shares reversed on a dime in heavy volume which saw 52 million shares traded taking down both NDX and SPX because of its market cap and the stock closed at 497 below the 500 marker. The downside of this parabolic chart is an empty space and lots of it at the right of the chart. Its like bungee jumping from a bridge.

S&P500 also struck a high note just shy of July highs of SPX at 1355 and reversed. It faces some resistance from the left. According to Keith Bliss of Senior Vice President of Cuttone and Company “You are looking at good old exhaustion inside of the market,” .

The market is tired here and has gone up in a channel since December 19, 2011 and hasn’t stopped for a pause or a breather. These overbought conditions makes it an easier target for short sellers and profit takers alike.

Its to be noted that the market has lately shrugged off any economic news out of Europe and Greece. There has been some concerns but they were waved off in the glee that followed AAPL to the top and nothing changed the upward direction of the market. Greece riots and the austerity plans barely put a dent in the markets enthusiasm lately and positive economic data fueled the rally.

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6 Responses to “AAPL : What goes up must come down”
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