Apple (AAPL) stock will fall to $80 or less in the next few months, according to comprehensive technical analysis.
That prediction is based on the same set of analytical tools that yielded this Oct. 2 forecast that Apple shares would rise to the $120 area after hitting an August low of $92.00. The same day that forecast was published, the stock closed at $109. By the end of November, the stock reached the target level and began to roll back down. In that analysis, the decision support engine's algorithms showed that after the stock tested $120, the shares would go even lower than the August low and would target $75 +/-$5, with an increasing probability of $60 +/-5. The following monthly bar chart shows the updated price behavior, but there's no change to the forecast. $80 remains the highest level the stock must test in order to complete the entire correction off the stock's peak near $133, with further bearish potential to the $60 zone.
The only difference between the current forecast and the Oct. 2 one is that the path toward $80 now has an intervening relief bounce, from current levels to around $110. Otherwise, the objective conclusion is to continue to avoid Apple shares until the decision support engine yields its next buy signal on the stock.
The timing for such a signal is at least several weeks to months away, as can be estimated by the still-crashing stochastics. Stochastics reached the same overbought extremes around last year's high and around the 2012 high. In both cases, the stock's price was making higher highs while stochastics were making lower highs, creating a bearish divergence sell signal. Both instances are highlighted by the bold blue lines pointing in opposite directions in the top and bottom panes. This condition is a warning that the decision support engine always searches for. It's as bearish at a top as it is bullish at a major low. With this major sell signal in force, the crashing stochastics must be given wide berth to continue to their oversold extreme condition, which will be seen once the 10% threshold is tested. Again, that is likely still weeks to months in the future.
Let's now ask the objective decision support question, "If I have no money in Apple, are buying or selling actions indicated at this moment?" The conclusion depends upon your time frame. If you trade with a duration of a couple of days to a couple of weeks, there could be a 13% bounce, as the stock's price moves off this week's low near $97 to the $110 area. But, it's unlikely anyone can buy the lowest low and sell the highest price. So, trimming some fat off each end, the meat of the bounce might actually be more like 8% to 10%.
On the other hand, the downside is still substantial, and if you get caught up in the greed factor of getting money back that you've lost in the past few months, the perfect scenario could become ugly in a hurry. The decision support engine's intermediate conclusion is that selling actions are indicated, not buying actions. Buying actions occur when stochastics are in the green box/green oval at the bottom of their travels. In the chart above, they are just now departing the neutral zone, heading south. Therefore, buying is not indicated.
Further, to conclude that the entire corrective decline is complete, we would expect the price behavior to have formed an impulsive rise off last week's low, near $97. Not only has that not formed, but the opposite pattern has. That is a corrective up/down/up structure, which is the definition of a downtrend that is still awaiting completion.
This 31-minute bar chart above implies a probe of the August low, near $90, but an eventual test of at least $80, before the entire correction is over.
Interested in this kind of market analysis? Sign up today for a FREE 7-day trial of our Decision Support Engine Premium Service at no obligation. Inquire about special pricing for TheStreet.com readers after your complimentary trial.
You see Jim Cramer on TV. Now, see where he invests his money and why Apple stock is a core holding of his multi-million dollar portfolio. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.