(NASDAQ:AAPL) is most certainly trying to put in a bottom after its almost 40% peak to trough draw-down from the September highs. For most of yesterday’s trading, AAPL continued its relative underperformance, looking like it was headed for a new 14-week low, until BAM! -- a Twitter-bomb to the rescue:
Those tweets were by @ProffesorKev (53 followers). On his Twitter profile
, he claims to, “Love the action and manipulation & thankful for this trading opportunity to easily afford me more family time.” This tweet was re-tweeted not long after by someone who has a much bigger following, @Biggercapital (7,100 followers). At that point a Twitter rumor was in full effect and AAPL had a 2.5% reversal off of the lows.
For certain, some AAPL longs were certainly thankful for the "action" and "manipulation."
Yesterday I wrote about
Twitter being the first real productivity tool of the social Web, and I guess that can be extrapolated for all sorts of uses for all kinds of people. Twice now in the last few weeks AAPL has been saved from new lows by Twitter bombs relating to the company’s plans to distribute cash or split the stock. The first was just wrong, and only time will tell on this one, but I would assume this one is too, or at the very least the timing is off on both.
The fact that AAPL trades so frantically over non-product-related rumors suggests to me that the stock has not completed its bottoming phase. The slope of the decline off of the highs is fierce, and the stock has held the downtrend fairly consistently (last week Enis Taner had a great Chart of the Day
on AAPL’s recent countertrend rallies). AAPL could clearly bounce back to $450, or possibly back to the 50-day moving avg at ~$475, on a meaningful cash distribution plan, but my sense would be the stock needs to get washed out in some sort of capitulation that takes it back toward the breakout level of late 2011, early 2012.
AAPL 2 Yr Chart From Bloomberg
The much anticipated AAPL “bottom” will not be the result of Twitter rumors, but much more likely will be a process that combines news related to financial engineering measures, and a return introducing innovative products, regardless of whether they come at lower gross margins. This will take some time, and I think it is unlikely that the stock will make a V bottom. As a trader, AAPL’s relative price action is nothing short of awful; as a potential investor, I prefer this action because the stock below $400 (on a panic preferably) probably sets up as one of the best long term holds in recent memory!
This item by Dan Nathan was originally published on RiskReversal.com
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