Today Apple Inc. (NASDAQ: AAPL) has sold over two million of its new iPhone 5 devices in China, just three days after its launch on December 14.

The iPhone 5 will be available in more than 100 countries by the end of December, making it the fastest iPhone roll out ever.

“Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China,” said Tim Cook, Apple’s CEO. “China is a very important market for us and customers there cannot wait to get their hands on Apple products.”

China became the world’s No. 1 smartphone market by volume in the third quarter, according to the research firm Strategy Analytics.

Guess what? AAPL’s number one source of revenue comes from smartphone devices.
Note the chart posted (Source: ThinkOrSwim)

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Why is the stock still dropping?

AAPL has been in a down trend for the last couple months giving mad grief to all the patient long term AAPL bulls.  Apple’s fundamentals don’t seem to match up with the stock’s performance.  Remember, 12 months ago AAPL was trading for less than $400 per share, where it’s sitting now it’s still up 35% on the year… not so bad when you look at it like that.

The Death Cross

The death cross is when the 50 day moving average crosses the 200 day moving average. This can signal a huge shift in direction and in my eyes gives a warning flag that Apple’s momentum is not what it used to be. All the people who have enjoyed monster gains over the last few years buying calls will have to re-evaluate their strategy. Just to give everyone a reference, AAPL stock has not had a “death cross” since September of 2008! (re-posted from AAPL Death Cross article) btw, AAPL has dropped over $50 since I warned about this cross. Is this a real sign or just investor panic.

The crossing of these moving averages show that AAPL has in fact slowed in momentum, however it does not say that AAPL can’t bounce from here! Just some food for thought…

Here is a one year chart of AAPL showing $500 as a possible support area. AAPL bulls are preying this level holds as support.

The disconnection between the fundamentals of AAPL ( still growing) and the way the stock has performed over the last two months ( dropping) is so apparent that even Wall Street analysts are starting to lower their targets on AAPL.  How is this suppose to help the average investor?

I personally think that this is total garbage, especially considering the fact that AAPL has already dropped 200 points. A little late to the game in my opinion.

Are we Bouncing with a Reversal Candle? 

The bullish engulfing candle we saw today may be the first sign of a possible reversal in AAPL’s share price. Next stop is the gap fill up to $528 and if AAPL continues up from here we could see the $555 resistance area before the new year.  Many of you who have been reading my posts for a long time know that I will be waiting for a little more confirmation before stepping into a big long position… maybe a Feb Bull Call Spread… once I see some confirmation.

trade different,
Micah

 

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