24/7 Wall St.

Apple Inc. (NASDAQ: AAPL) is in trouble on its stock charts.  Its stock has now fallen five days in a row, a feat not seen in months.  Pure technical analysis does not care about the fundamental side of the equation.  A pure technician will likely only opine, “who knows why and who cares why, it is what it is.”

A very detailed chart review from this last weekend broke down many of the possible reasons behind the move, but the added weakness yesterday came from this surprising NASDAQ 100 Index rebalancing.  In our weekend review, we detailed each of the possibilities for the reason behind the drop were as follows: making new hot products obsolete too fast for customers, Japan and supply chain woes, growth slowing at key OEMs, smartphone competition and maturity, a slowing of PC sales and the trade-down effect of tablets, health of Steve Jobs, a peak in digital music sales, its mega-cap status as the second largest stock in America, and more.  Each of these were broken down in detail in our first chart review.

The  only real analyst downgrade came last month from JMP Securities, and that may have helped do more psychological damage than anything as this was the first real analyst downgrade in this entire up-cycle. That move effectively took shares down from $345 to $330 before a brief recovery.

All that being said, we want to revisit the chart situation with this StockCharts.com chart.  Things have gone from bad to worse.  Last Friday marked the violation of Apple’s 50-day moving average.  What you don’t want to hear if you are an Apple-bull or a fanboy is that this was actually the second 50-day moving average violation seen.  The other issue is this steady pace of lower-highs each time Apple’s stock has rallied.

If you look back to February, March, and now April, you’ll see these moves and peaks with a last blow-off top peaking around $365 in February.  We noted over this last weekend that technicians would start calling for blood if the stock chart did not rectify itself.  It has not been rectified and the chart has gone from cautionary to bad.

Apple’s Bollinger Bands have turned even worse as well and now the bottom band has also turned downward and the peak and floor indications have crept down to $358.19 and $330.29 respectively.  Apple’s RSI and MACD levels are starting to approach oversold territory but these are certainly not signaling any major oversold reading yet.

We were surprised to see a figure in Point & Figure charts, although if we use simple peaks and lows for the $365 peak and a recent $330 floor, a technician would say that $295 is not out of the question.  That Point & Figure target from StockCharts.com in the gallery view shows a 3 box reversal chart and its downward price objective is $292.00.

It should be noted that Apple’s 200-day moving average is now currently $304.42 and its 50-day moving average is $347.87.  Apple has not violated its 200-day moving average on the downside since the V-shaped recovery took hold in 2009.  The real last 200-day violation was in late 2008 when tech stocks hit skid row.

OK, there is still some good news here for the bulls.  First and foremost, Apple remains a favorite and is Wall Street’s darling stock.  The company’s products have yet to miss a beat and even the troubles that have come up have yet to hamper demand.

Another positive is that Apple’s stock is not expensive, and it is arguably cheap.  The stock trades at 15-times 2011 earnings estimates and just under 13-times 2012 earnings estimates.  It also sits on a cash arsenal of more than $50 billion.  Options volume was more favorable to call-options than to put-option buying despite the rebalancing news on Tuesday.

Another positive is smoothing out the time periods with weekly charts, where the full gallery shows that this is not yet showing significant violations longer-term.  Even at $338.89, Apple’s 52-week range is listed as $199.25 to $364.90 and that gives the bulls more room to say that Apple is still strong.  Analysts still have a consensus price target objective above $424.00 and there are still some calls for more than $500.00 in the coming years.  One last positive is that Apple’s rebalance woes from the NASDAQ 100 Index changes were actually much less at the end of trading on Tuesday than what had been projected in early morning trading with a $338.89 close versus a $336.99 open and a low of $336.00 on the day.

Some news making the rounds so far is also that Apple got a key patent case jury verdict overturned by a judge this week.  That eliminated what had been an order for Apple to pay $625.5 million in damages, and that in turn may hurt other patent cases against Apple.

Our aim here is not Apple-bashing.  It is simply to explain the charts and show what fundamentals are acting against Apple and which are still positive in Apple’s favor.

We are now within two weeks of earnings as Apple is scheduled to report its earnings on Wednesday, April 20, 2011 after the close of trading.  Apple’s share trading in Europe was too thin and the drop is too small to have any real feel for Apple indications this Wednesday morning. So far we have seen Apple shares trade up as much $1.00 in very early bird pre-market trading indications this Wednesday morning.

You can join our free daily email distribution list to hear more about analyst upgrades and downgrades, top day trader and active trader alerts, dividend trends, news on Buffett and other investment gurus, IPOs, secondary offerings, private equity, and more.

JON C. OGG