Friday, 25 January 2013

Apple is screwed...


Back in 2012 I indicated to my subscribers that one should be extremely careful about buying Apple shares. This was around the time that Apple shares hit an all time high of $700 and pretty much every other person and their dog that I spoke to had bought their shares or was about to start piling into it. The general consensus was that Apple was a great company with great products, it's outperformed nearly every other share out there and that they were still producing innovating products. And if you said or thought that, you'd be quite right. They are a very profitable company and have completely revolutionised pretty much every industry they've jumped into like portable music players and phones. To be honest, I used to be a bit of an Apple junkie and had iPhones from the start, all the way up to the 4, but I'm afraid the prices of a share go far deeper than being a 'great company with great products'. To an extent it's about supply and demand of the said share but Apple was always doomed for being a bubble once it got the attention of mutual funds and hedge funds. Its own fame was its nail in the share price coffin...

You see it really doesn't matter what the company is or what it does once a few big mutual funds targets it. I'm being very general here, but what tends to happen (mostly in the States) is that people with a bit of spare cash to invest go to a mutual fund and speak to an investment advisor. These advisors are normally just sales people and just pump whatever stock is paying the juciest commissions. And if the mutual fund is quite big, the chosen stock normally starts to rise. This attracts more investors and there you go, you've got your bubble started. Netflix is a key example of this. However there's only so much interest and people to buy a certain stock and you normally get to the point where there's simply no one left to buy this new super stock. But the hedge funds (normally coined as the smart money) notice this as they tend to be ahead of the curve and exit the stock to realise their profits. This doesn't help the bubble stock one bit and the price tends to start falling. Then you eventually get to a pivotal point where everyone starts a mad dash to try and grab their profits before it crashes even further and the rest is history. This happens all the time to good and crap companies and I'm afraid to say it Apple lovers, but Apple is a bubble. I called the top of $700 and said it would probably fall to about $400. Well looking at the price today, it's crashed down rather fast to $452. That's a huge 35% loss in the last few weeks.

But surely it'll rise up again?

No is the simple answer. In order for Apple shares to climb to their previous highs, there needs to be some intense economical stimulus like QE5, or Apple needs to completely revolutionise another sector...perhaps TV? But the main reason why there is next to no hope for them is due to the Nasdaq 100. This index is simply an average of the 100 biggest/most traded tech companies in the States like Google, Apple and Amazon etc. So when the Nasdaq is going up, US tech companies are doing well and vice versa. However when you look at the weekly chart, we're seeing a textbook Head and Shoulders set up. In a nutshell, this is a very strong (and reliable) reversal signal. So it's very likely that in the next few months, we'll see it testing the neckline. If this then breaks below it, this will then start the long anticipated market correction I've been talking about for the last few months. It'll bring down the other indexes like the S&p 500 and the Dow.


Summary
I'm currently shorting Apple and the Nasdaq. Getting ready to short the S&P and the FTSE and for anyone reading this, please have a long hard look at your current share portfolio. In particular, look at their history. If your share did well during the 2008 and 2010/11 crash, you may be ok, but if it didn't, things could get rather stressful for you in 2013.

Note: I am completely out of the stock market. I only trade on the movement of it and the only things I invest in is physical Gold, Silver and Melina trees.

2 comments:

  1. Are you still short Apple despite Carl Icahn?

    ReplyDelete