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TheStreet Open House

Apple Back in a Wedge

Stocks in this article: AAPL

I have used several TA techniques to help people visualize a potential target price, based on well known and accepted TA patterns. There's the head and shoulder pattern, which shows a target of 355. That's seems unfathomable when you consider the value of each share juxtaposed to Apple's cash on hand, which comes out to about $150 per share. Man, if you used a simple three times multiplier, then on a cash basis alone, the stock should be priced at $450. I just pulled that out of my hat by the way, just like an analyst, but it sounds reasonable, right?

If I were to use Elliott wave principles, then Apple stock price over the past seven years has been in a Super Cycle, where the the high price of 705, set in September of last year (2012), was the completion of Wave One, and the current downturn is Wave Two. According to Elliott wave Principles, the Wave Two will be made up of three waves down, referred to as A-B-C. And the rules are that Wave A will Equal Wave C. If that is true, then the target price for the bottom is 390, at which point the Wave Three of the Super Cycle will commence. And if that's true, then Apple is in for an incredible run to the Wave Three potential, which is measured by multiplying the Fibonacci Golden ration of 1.618 times the percentage of the advance, which works out to 1404! Whoa! And could go as high as 1600! But that will take 2 to 3 years.

Well, the point of this post was to put in perspective the efficacy of technical analysis, and to tell you there are many ways to analyze where Apple's stock price is going and where the bottom is likely to be, at least based on some artful techniques and pseudo science. We all need something to grasp hold of. Just sitting here and watching the company we love get torn to shreds in the media, and the stock price just keeps falling, it's hard, really hard. It's the not knowing that's the hardest. So, at least with a little SWAG (Scientific Wild-Ass Guess), you might be able to feel a little better knowing that there is a way to explain Apple's price, and there is a bottom, and it seems to be really close.

-- Written by Ernie Varitimos, author of the Apple Investor blog.

This article was written by an independent contributor, separate from TheStreet's regular news coverage.

Ernie Varitimos has a long history with Apple as an investor, trader and consumer of its technology. He started his career as a rocket scientist and has spent the past 25 years driving, controlling and influencing technology in the financial industry. Ernie is a former hedge fund manager and current futures trader.
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