The chart pattern shown, stretching back to January, looks like a garden variety rally-and-consolidation. And yet, it’s hardly a stretch to think the flag portion of the pattern should be doing better — should have touched the midpoint pivot at 135.83, for one, before receding from the recent high at 132.97. So why the shortfall? It’s tempting to think that AAPL, like the stock market itself, has lost its mojo. If so, it would hold no small consequences for the broad averages, since AAPL is the 800-pound gorilla of the Nasdaq Index, as well as the most valuable company in the world by capitalization.
Is it too early for investors to start worrying that Chinese upstart Xiaomi might someday eat Apple’s lunch in the cell phone business? That is Xiaomi’s intention, and there are users ready to attest that, even now, the Chinese company’s phones are as good as Apple’s — for half the price. Such comparisons have never fazed the cult of buyers who have remained loyal to Apple products no matter what their cost or technical bugaboos. Even so, it behooves us to treat the stock as vulnerable in the event of a global economic downturn. Apple has been growing phone sales at higher and higher prices — unheard of in the retail world — but it remains to be seen whether this will continue in tough times. The fact that the company has an increasingly formidable competitor in China — perhaps more formidable, even, than Samsung has been in Europe and Asia — is reason enough to pay close attention to any prolonged period of slack in the price performance of the stock.
Another formidable competitor, Spotify, has put Apple in the unfamiliar position of having to play catch-up. Spotify correctly saw the market shifting from “owned” music to streamed music; Apple sat by for 12 years and stuck with the old model. Now, it will require a very deft blending of content from a variety of sources and media for Apple to recoup the segment of the market it effectively ceded to Spotify. Will Apple be able to dominate with content that is neither hardware- or software-specific? The jury is still out on that one, but they will not have the iTunes advantage of having been first to exploit a particular way of delivering content. _______ UPDATE (June 21, 4:00 p.m.): The heaviness of Apple shares lately is worrisome, especially since some of the other high-beta tech stocks favored by portfolio managers have eked out gains while AAPL has fallen. If the weakness continues, look for a further fall to at least 125.22 to start the week, or perhaps to 123.57 if any lower. Both of these Hidden Pivot supports are shown in the new chart. Despite this picture of tiredness, you could try bottom-fishing at 125.22 with a stop-loss as tight as 11 cents. _______ UPDATE (June 24, 7:31 p.m.): Yesterday’s vicious short-squeeze spike may have seemed impressive in real time, but it was just a pisher from a Hidden Pivot perspective. When it gets past the 130.18 peak that I’ve labeled, then we should take notice. That would put AAPL on track for a rally to 131.78, or perhaps 133.83 if any higher.