Titans Apple and Google have fallen

Jan 17, 2008: 9:46 AM CST

Market leaders and high-fliers Apple Inc (AAPL) and Google (GOOG) have fallen dramatically from their all-time highs of late 2007, which is a major reason why the broader markets have turned negative. Let’s look at their daily charts:

Google has fallen $140 from a high of $740 to a test of $600 yesterday. Due to the recent triangle break and moving average breakdown, combined with the 20 period MA crossing under the 50 period, a test of the rising 200 period average near $560 is indeed possible given further market weakness.

The daily trend is confirmed as down, due to the moving average orientation and the price swing structure (series of lower lows and lower highs).

Apple is showing a near identical pattern:

Rather than a classic triangle consolidation as in Google, Apple is breaking down from a rising wedge pattern, which has also broken beneath the key 20 and 50 period moving average, and the 20 looks to be crossing beneath the 50 today.

Although trading solely based on the moving average will always produce late signals and occasional whipsaws, some funds and traders use crossovers as their main trading entry/exit signal. These funds/traders will likely be entering new shorts in Apple today if that is indeed the case.

A test of the 200 period MA is rather feasible, but not certain. Such a test would take price to near $145.

As a bonus, here is a chart of Potash (POT), a very popular and ‘high-flying’ fertilizer/agricultural stock of 2007:

Potash also appears to be breaking down. Price carved out a new momentum low after forming a quick divergence. Price is now beneath the 20 and 50 period MA, yet their orientation is still bullish and the trend still remains up.

Potash has only made a lower low, and to be confirmed as a downtrend, would need to make a lower high and then swing back to take out the lower low.

The service at INO Television has videos and information which can be extremely helpful in learning about new techniques, such as short-selling and put option strategies (as well as credit/income generation with options in volatile market conditions).

Don’t be afraid to short if need be. If you’re afraid to short, consider buying a very small amount of put options.

Trade well!

3 Comments

3 Responses to “Titans Apple and Google have fallen”

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