Is Apple Turning Sour?

04/14/2011 8:00 am EST

Focus: STOCKS

Chris Perruna

Founder, www.chrisperruna.com

Shares of the tech giant may be struggling, but now is not the time to short the stock. Here’s how to know if the right time is upon us, and until then, just sit tight or consider banking some profits.

Apple, Inc. (AAPL) is up more than 4,300% since March 2003, the beginning of the bull market following the bursting of the stock market bubble post 9/11. The stock is up slightly more than 1,200% since I started covering it online.

I have owned AAPL on multiple occasions over the past six years, but I wish I could sit here and write to you that I was a holder the entire time (my gains are just a small slice of the longer-term buy-and-hold pie).

I wasn’t a 1,200%+ gainer, but I was in and out while taking profits on a yearly basis back in the mid-to-late 2000’s.

chart
Click to Enlarge

I often wrote yearly blog posts about Apple, or as I called it, “Green Apples,” due to the fact that it was a “cash register stock” and did nothing but go up.

So, with all that praise and the massive gains, am I really turning bearish on the stock? Is Apple starting to turn sour?

Well, not so fast, but some minor red flags are starting to show up.

Apple is still trading above the 200-day moving average (MA) and has not violated any long-term trend lines, so please do not short at this time.

You can cash in shares and start to trim back your position by selling, but I don’t advise going short just yet.

The ideal position to sell short is after a move below the 200-day MA, when the stock tries to break back above but fails. That’s my sweet spot.

Goldman Sachs set a price target of $430, but I don’t listen to the “talking heads.”

Another interesting fact: “Nasdaq OMX plans to announce a rare rebalancing of its Nasdaq-100 index, which will reduce the big weighting of Apple, which currently makes up more than 20% of the index.”Wall Street Journal

chart
Click to Enlarge

As of today, I suggest cashing in some shares if you’ve been long for a while. With a further drop, I’d suggest selling even more shares. However, I wouldn’t even consider the word “short” until the stock closes below the 200-day moving average (as a trend trade of course, not daytrading).

chart
Click to Enlarge

By Chris Perruna, trader and blogger, ChrisPerruna.com

Related Articles on STOCKS