Apple Down 25% From Its Peak..Will You BUY?

Tech giant Apple (AAPL) became the market cap leader among the world’s public companies. However, the consumer electronics firm’s shares have fallen so quickly in recent few weeks and is down almost 25% from its peak. There were speculations on wall street already that stock will break 500 psychological level which it did finally today for brief period in pre- market, a level at which it has not traded since last February.

Analyst are downgrading the stock like there is no future for this stock and recently today Citi cut Apple to neutral and lowered its price target to $575 from $675. However, Fundamentals do still look strong for Apple as it has sold over 2 million iPhone 5 in China over the weekend.

Most importantly this iPhone sale was on the second largest mobile provider network in China. The largest network is China mobile which is still in talks with Apple. This was the biggest smart phone launched in the region for smart phone and smart money is still moving in apple and considering this big drop in price as an opportunity to buy this stock.

Worries and fears do remain among investors how Apple’s earnings will fare its rivalry with Google (GOOG) Android-powered devices. Even though Google does not make any money from Android but it is increasing its market share among smart phone market where Android’s worldwide share of the smartphone market was 74% in the third quarter, up from 53% in the same period a year ago. On the other hand the market share of Apple’s iOS fell from 15% to 14% over the same period according to market data gathered by Gartmore.

In terms of supply, apple has also improved its supply to cater the holiday season demand and most stores are positive about their sales outcome according to Bloomberg. Looking at more closely on the Apple balance sheet we can see that apple has invested more than 2 billion dollars in innovation R&D department so that it has to rely less on foreign producers for its part.

There are also rumors on Wall street that this 2 billion spent can be towards its new product for which market is waiting for long time. Tim Cook in his recent interview has also confirmed that he is bringing the manufacturing back to US in 2013 and Apple is spending substantial amount in talent acquisition and in its production site in USA.

Technical Analysis
Comment: The declining 20D and 50D MAs maintain the downside bias.

The RSI is around its neutrality area at 50% and capped by a bearish trendline.

Trend: ST limited decline; MT bearish.

Supports and resistances:
651 **
629 **
594 **
509.794 Last
467 **
427 **
402 ***

DISCLOSURE AND DISCLAIMER: The Above Is For Informational Purposes Only And Not To Be Construed As Specific Trading Advice. Responsibility For Trade Decisions Is Solely With The Reader.

By Naeem Aslam