SpikeTrade.com Blog
Is AAPL Done? by Grant C
http://spiketradeblog.blogspot.com/2011/10/is-aapl-done-by-grant-c.html

Apple Inc., led by recently deceased Steve Jobs, has been an institutional favorite since 2009. Driven by extraordinary creativity, the company introduced remarkable  product after remarkable product, and I've been a fan for years. After Jobs death, I read an analyst's comment that AAPL would continue to rally, and with a lowish PE for a tech company, AAPL was heading a lot higher. Since I trade AAPL now and then, I thought I would take a long look, particularly since AAPL is a major driver of the NASDAQ index.


When I pulled up the chart, I jumped back, wondering how much the Puts were, or whether I would commit that much money to shorting a $400 stock (nope). So, what has me worried about AAPL? Besides the bearish divergences and the possibility that we may be forming a lower high, which would confirm the downtrend, the volume is scary. On both the weekly and daily charts, AAPL shows clear signs of distribution--large amounts of selling, and greater selling on down bars than on up bars. Generally, this means that hedge funds and/or institutions are liquidating large positions--taking profits while they still can. When the institutions decide to get out of a leading stock like AAPL, it can take weeks or months before they are finished, and each rally is capped as they push more supply onto the market. Since AAPL has a market cap of almost a billion shares, once the institutions say the game is over, distribution is the result. 


So, I'm watching AAPL carefully over the next few days--not only for its own price weakness, but how this heavy selling will impact the tech indexes. An even more interesting question is where will the money go from the profits? Will the profits from AAPL rotate back into the financials? Maybe it is finally time to buy the banks...

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