We suggested a few weeks back that bottom fishing in AAPL was likely a bad idea.
This commentary came on the backs of our original post on the name back on October 5th, 2012 when the stock stood at nearly ~$660 and we said:
“With today’s decline we view the technical set-up in the stock as being as precarious as it’s been in some time.”
Thus far, the non-bull side of this trade has been the correct call.
As the non-logarithmic chart below (used to highlight the parabolic move the stock had in 2012) shows, AAPL broke below its last bastion of support line (1) today.
In doing so, it’s entered the trading zone from its parabolic move higher in 2012 that ultimately took the stock to $700 from ~$420, with a quick, intermediate stop/sell-off at $500 on the way up.
To the extent that this trading zone from $420-$500 was a parabolic move, it was likely characterized by purely speculative buying interest on the way up and not institutional activity.
Areas like this tend to have very little support (because institutions didn’t see value in this area in the first place) and represent demand vacuums of sorts.
As such, we’re inclined to believe that AAPL’s weakness could now accelerate, leading the stock into the combo of line (2) and a large gap to fill, both meeting at ~$420, some ~13% lower.
Bottom fishing is still a bad idea here.