Apple Chart Watch: The Inevitable Breakdown (AAPL)

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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 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.