This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Apple Just Signaled the Bottom You're Waiting For

NEW YORK ( TheStreet) -- A phenomenon Wall Street insiders know is that markets peak on good news and bottom on bad news. Market-timing legend Tom DeMark of Market Studies revealed, in New Market Timing Techniques: Innovative Studies in Market Rhythm & Price Exhaustion, an initially counterintuitive correlation between the appearance of positive news and the price reaching a summit, or vice-versa.

My oversimplification notwithstanding, DeMark claims that a stock (or any traded security) reaches a peak because the "last buyer" comes on board. Conversely, a stock bottoms when the "last seller" throws in the towel and gets out. Obviously, the terms "last buyer/seller" is used figuratively, but the point is, when there are so many buyers already in a stock that positive news isn't able to push the shares higher (because "no one is left to buy"), there is no other direction for the stock to go but down.

Once the trend shifts lower, the slightest negative news will accelerate the process. As stop losses are triggered and sentiment changes, you are left with a chart pattern that resembles a mountain. The inverse is also true.

If you examine the bottoming of a long-term chart pattern that looks like the letter "V," you will sometimes see that near the date of the exact bottom is significantly negative news, but the shares actually remain flat or appreciate.

Let's take this theory one step further, with Apple (AAPL - Get Report) as an example.

Take a look at some of the negative articles about Apple today after losing a court battle with the Justice Department:
Judge Comes Down 'Hard' on Apple in E-Book Ruling
Apple Loses E-Book Trial
Apple Price-Fixing Verdict May Not Result in Cheaper E-Books
The Apple e-Book Case Is Headed for the 2nd Circuit

It's fair to say that Apple's loss was widely covered, and Apple being Apple, no one missed the news. In other words, all else being equal, the market's participating buyers and sellers fully understand that Apple lost a significant court case and, as of my writing, the shares are trading near even or slightly higher.

Even more noteworthy is, no one knows what the damages will be. How about civil suits? Losing the case opens the door for civil litigators chomping at the bit to take a bite out of Apple (rinky-dink pun I know). Wall Street hates uncertainty, and yet, Apple investors were delivered two-scoops of uncertainty Wednesday, and the shares hardly flinched. AAPL Free Cash Flow Chart AAPL Free Cash Flow data by YCharts
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.03 -0.71%
FB $105.41 -0.31%
GOOG $748.15 -0.02%
TSLA $229.64 5.22%
YHOO $33.16 0.61%


Chart of I:DJI
DOW 17,813.39 +1.20 0.01%
S&P 500 2,088.87 -0.27 -0.01%
NASDAQ 5,116.1430 +13.3350 0.26%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs