By Markus Heitkoetter
Apple (AAPL) could be one of the most controversial stocks ever. It seems that half of the analysts say “BUY AAPL”, while the other half says “SELL AAPL”.
So what is the right thing to do?
Should You Buy AAPL – Or Sell It?
And if you currently own AAPL in your portfolio, should you hold or get rid of it?
Let’s take a look at the big picture first:
After making all-time highs in 2012 at $705.07 a share (on 9/21/12), AAPL lost almost half of its value, with a 2013 low of $385.10 (on 4/19/13). AAPL finally finished the year at $561.02.
With the NASDAQ up 38% for the year, AAPL was a 2013 disappointment, clearly underperforming the broad market with only a 5% return in 2013. In fact, it took until the last week of November for AAPL to finally move into positive territory for the year.
So Where Does AAPL Go From Here?
On January 2nd, 2014, Wells Fargo analyst Maynard Um downgraded Apple from “Outperform” to “Market Perform”, and assigns a valuation range of $536-$581.
The very same day Brian White of Cantor Fitzgerald Equity Research believes the rally will continue. He is calling Apple the “top large-cap pick” for 2014 and says the tech giant will excite investors this year.
So the “talking heads” don’t give us any guidance – no surprise!
Let’s take a look at the chart:
Using the Power Crossover Method we have 2 indicators that have crossed bearish twice in the last 3 trading sessions. If we see a confirmed sell signal after the 3rd indicator crosses, AAPL could be on its way down.
Don’t Dump AAPL – Yet
There is an interesting support/resistance level lingering around the $539 mark. On 10/29/13 traders rejected new highs at the time, trading as high as $539.25. This high wasn’t touched again for another month before finally moving higher and breaking into positive territory for the year.
After the last Power Crossover uptrend, AAPL kissed this resistance level on the way down (what was resistance becomes support), trading as low as $538.80 on 12/18/13 before attempting another push higher. $539 could be the line in the sand between bulls and bears and is a support/resistance level to watch.
Right now we are waiting for Stochastics to cross before considering a SHORT or better yet, buy AAPL puts.
Once the Power Crossover Short Signal occurs and we break $539, AAPL could make its way down to $500 without much effort. If we see a convincing break below $500, we could see a move to $450 or even $400 again.
When this article is posted AAPL is at $540,98.