Apple downside indicators
Updated
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Why would anyone be bearish on a stock that has gone up over 200% in the past 18 months? I'm just watching the chart.
If you look at the chart you see some concerning trends, mainly;
- Volume dropping off since March 2020 as the price increases meant the stock was less and less of a bargain.
- Some rather strong RSI bearish divergence - where every higher price highs are shown as lower highs on the RSI - which is at the least a sign of slowing momentum.
- Dividend return having significantly weakened in 2021.
- Higher inflation, which tends to drive investors to seek higher dividends or safe havens (since the US10 year isn't a safe haven anymore with an annual return of 1.44%. Given the CPI for October 2021 sits at 6.2%, that yields a *negative* 4.76% annual return that counts out treasuries as a safe haven). Apple has scope to raise its dividend as it currently only pays out around 25% of net profit as dividends - but right now the dividend is rather negative and should the price rises stall I would imagine we could start to see some strong selling pressure as investors see their unrealized gains melt away or leveraged traders / investors turn negative.
When I am watching the RSI I watch for 3 peaks of lower highs that then pushes the RSI below the 70 level. Once that happens, prices tend to weaken and I would expect an RSI of sub 40 to be next for a significant retracement. I don't have a target yet but After its 2000 peak it retraced 80%+ and ~60% during the 2008-9 financial crisis, so the downside is clearly there for anyone to see. Bearish RSI divergence was also evident in 1999-2000 and 2007-8.
I tend to agree with Michael Burry's general thesis that stocks that have priced in significant future growth will be hardest hit during periods of inflation.
Anyway, just putting it out there. I am not an investor and not shorting.
Look after those funds everyone
Why would anyone be bearish on a stock that has gone up over 200% in the past 18 months? I'm just watching the chart.
If you look at the chart you see some concerning trends, mainly;
- Volume dropping off since March 2020 as the price increases meant the stock was less and less of a bargain.
- Some rather strong RSI bearish divergence - where every higher price highs are shown as lower highs on the RSI - which is at the least a sign of slowing momentum.
- Dividend return having significantly weakened in 2021.
- Higher inflation, which tends to drive investors to seek higher dividends or safe havens (since the US10 year isn't a safe haven anymore with an annual return of 1.44%. Given the CPI for October 2021 sits at 6.2%, that yields a *negative* 4.76% annual return that counts out treasuries as a safe haven). Apple has scope to raise its dividend as it currently only pays out around 25% of net profit as dividends - but right now the dividend is rather negative and should the price rises stall I would imagine we could start to see some strong selling pressure as investors see their unrealized gains melt away or leveraged traders / investors turn negative.
When I am watching the RSI I watch for 3 peaks of lower highs that then pushes the RSI below the 70 level. Once that happens, prices tend to weaken and I would expect an RSI of sub 40 to be next for a significant retracement. I don't have a target yet but After its 2000 peak it retraced 80%+ and ~60% during the 2008-9 financial crisis, so the downside is clearly there for anyone to see. Bearish RSI divergence was also evident in 1999-2000 and 2007-8.
I tend to agree with Michael Burry's general thesis that stocks that have priced in significant future growth will be hardest hit during periods of inflation.
Anyway, just putting it out there. I am not an investor and not shorting.
Look after those funds everyone
Note
If you followed this post - you would have sold within 5% of the top and if you hadn't you would be down 16% since the post. Just saying. I'm just doing this for fun and its just for entertainment ok? Don't sue me if I get it wrong sometimes. How much would following my post have saved your retirement fund?
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