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Has Apple Peaked?

By Jeff Clark
Thursday, March 3, 2011

Apple (AAPL) is a remarkable company. Nobody is more innovative. Nobody is more creative. And nobody is more effective at getting millions of consumers to trade stacks of hundred dollar bills for shiny technological gizmos.
Shareholders have been richly rewarded. AAPL shares are up 360% in just two years, and the stock is trading within spitting distance of a new all-time high.
Indeed, the company is firing on all cylinders. But after yesterday's action, I have to ask... Has AAPL peaked?
Stop laughing. It's a reasonable question.
For the past couple years, every time Apple introduced a new product, its stock rallied to a new high. Every new iPhone boosted the market cap. The release of the original iPad launched a series of new all-time highs for the shares. And every time... every single time... there were plenty of analysts and talking heads suggesting the stock had run too far, too fast, and was near a peak.
But not yesterday.
Yesterday, Apple unveiled the iPad 2 – the newest weapon in its technology arsenal. It was a big, big deal... a media circus. Steve Jobs even rose from his sick bed to make the introduction.
This time, however, AAPL didn't make an all-time high. Oh sure, it rallied three bucks right after Steve Jobs hit the stage. But the stock is still a good 10 points below its high from last month. More noticeable, however, is the lack of anybody, anywhere, willing to say anything bearish about the stock.
Allow me...
All the hype over the iPad 2, and the virtual media love-fest surrounding Jobs' return to the corporate stage should have been enough to push AAPL to a new all-time high. The fact that it didn't, suggests the stock is tired and in need of a rest. The following chart suggests the same thing...
As you can see in the chart above, the stock is tracing out a potentially bearish head (H) and shoulders (S) pattern – which signals the reversal of a trend from bullish to bearish. If AAPL breaks below the rising support line, currently at about $340, the pattern projects a move all the way down to $320.
It's always dangerous to buy into a stock just as the media is hyping a new product or a new technology. The unveiling of that product usually marks at least a short-term peak in the company's shares. Apple, however, has always managed to avoid that curse.
It doesn't look like it'll avoid it this time, though.
A drop below $340 will be the sign that the short-term trend has changed for AAPL. Aggressive traders can look to go short at that level.
Anyone looking to buy the stock should wait for something around $320.
Best regards and good trading,
Jeff Clark

Further Reading:

There is a fundamental change taking place in the PC industry. Consumers are buying tablets instead of laptops. And according to Goldman Sachs, tablets will replace one in every three PCs in 2011, forcing the big-techs to adapt their business models.
Frank reveals the three big-tech companies strong enough to buy their way into the tablet industry here: The Death of the PC Industry.
And Larsen shows the benefits of investing in U.S. tech stocks... in Asia here: The Big Opportunity for Today's Risk-Shy Tech Investor.

In The Daily Crux
Market Notes
Gold and silver both jump to fresh highs.
Hercules Offshore rockets 151% in six months... most offshore drillers are up more than 50%, as well.
U.S. dollar fund UUP sitting just half a percent off its multiyear low.
Volatility fund VXX rises about 8% in two days.
Market Watch
Symbol Price
S&P 500 1308.44 +0.2% +17.0%
Oil (USO) 41.39 +2.3% +6.7%
Gold (GLD) 139.92 -0.1% +26.0%
Silver (SLV) 33.84 -0.1% +104.4%
U.S. Dollar 77.04 +0.2% -4.3%
Euro 1.39 +0.6% +1.9%
Volatility (^VIX) 20.70 -1.5% +8.6%
Gold Stocks (^HUI) 575.65 +0.2% +36.4%
10-Year Yield 3.46 +1.5% -4.2%

World ETFs
Symbol Price
USA (SPY) 131.21 +0.2% +18.8%
Canada (EWC) 33.63 +0.5% +26.7%
Russia (TRF) 23.85 +1.8% +21.4%
India (IFN) 30.13 +1.0% +9.5%
Israel (ISL) 16.42 -0.1% +8.7%
Japan (EWJ) 11.41 -0.9% +14.1%
Singapore (EWS) 13.11 +0.2% +20.9%
Taiwan (EWT) 14.79 +0.3% +25.0%
S. Korea (EWY) 57.87 +1.2% +24.1%
S. Africa (EZA) 69.44 +2.2% +28.2%
China (FXI) 42.56 +0.9% +5.7%
Lat.America (ILF) 52.33 +1.5% +16.2%

Sector ETFs
Symbol Price
Oil Service (OIH) 161.75 +1.0% +32.6%
Big Pharma (PPH) 65.56 +0.3% +3.7%
Internet (HHH) 74.77 +1.1% +32.1%
Semis (PSI) 17.84 +1.7% +33.3%
Utilities (XLU) 31.84 +0.2% +10.9%
Defense (PPA) 19.67 +0.1% +11.2%
Nanotech (PXN) 10.03 -0.2% +1.9%
Alt. Energy (PBW) 10.51 +0.1% +9.4%
Water (PHO) 19.36 +0.5% +15.5%
Insurance (PIC) 16.75 -1.2% +19.3%
Biotech (PBE) 20.88 +0.5% +11.8%
Retail (PMR) 19.86 +0.2% +20.9%
Software (PSJ) 26.14 +0.4% +22.8%
Big Tech (QQQQ) 57.14 +0.5% +26.4%
Construction (PKB) 13.60 +0.9% +21.2%
Media (PBS) 15.02 +0.8% +21.8%
Consumer Svcs (IYC) 69.78 +0.2% +22.7%
Financials (IYF) 58.97 -0.6% +12.7%
Health Care (IYH) 67.78 +0.4% +5.3%
Industrials (IYJ) 68.80 +0.5% +27.7%
Basic Mat (IYM) 78.22 +0.7% +29.9%
Real Estate (IYR) 58.48 -0.8% +31.2%
Transportation (IYT) 90.47 +0.9% +22.2%
Telecom (IYZ) 22.84 +0.2% +24.1%

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