Apple Holders Selling Ahead of Death-Cross, Blaming Margin Requirements & Spending

Apple Inc. (NASDAQ: AAPL) is seeing a sudden move downward, one which we feel may be more technical than fundamental. It is also becoming less and less probable that Apple is going to reward shareholders with any large one-time special dividend as many have been hoping. Some are blaming margin requirements being lifted by COR Clearing but that might not be the same as elsewhere. Digitimes also reported that Apple is expected to purchase up to $5 billion in Flexible Printed Circuit Boards in 2013 as well.

The issue we see on the chartist side of the equation is a coming death-cross chart pattern in the next few days. This is a bearish chart pattern that occurs when the 50-day moving average crosses under the 200-day moving average, hence the death-cross. This may not mean much to fundamental investors, but the technical and chart traders will be talking about this more and more in the coming days.

Apple shares were down about 4% at $552 on last look after closing at $575.85 on Tuesday. As you will see in the stockcharts.com chart, the 200-day moving average has acted as an overhang over the last week. Apple has a 52-week range of $377.68 to $705.07 but its 50-day moving average is $603.83 and the 200-day moving average is $597.24 as of Wednesday.

What is causing the compression to occur so fast is that if go back some 50 trading days Apple shares were more $100.00 higher than they are today. When you start backing out old prices much higher with new prices much lower, it really creates a rapid erosion on the chart pattern. If Apple’s 50-day moving average continues at this rate, it will be late this week or early next week that the death-cross chart pattern will occur.

To show just how fast this is happening, the 50-day moving average just as recently as November 30 was $611.25 versus $603.83 today. With another big drop in the share price this coming death-cross may be coming to a head sooner rather than later.

JON C. OGG