I haven’t updated the Apple ($AAPL) analogue since 9/2013, after which my expectation was [delightfully] disproved. As noted when I caught whiff of the bull reversal, we held our AAPL position for a subsequent breakout, and we now enjoy an ~30% unrealized gain.
In terms of background, AAPL reported 2014fq1 earnings (financials & details) this evening, beating on the top and bottom lines, not to mention beating on its all-important gross margin number. Regardless, the stock traded down >8% @ $504 AH (as of print) on underwhelming iPhone sales volumes, forward guidance, and news of iPhone 5s supply shortages.
AAPL trades at a 9x PE (ex-cash), so I’m not that worried about its fundamentals or valuation, as I’ve said before. These undulations are just the psychological spasms of a crowd–irrational agents, to be sure. To handicap such psychology, I turn to the technicals.
To wit, Green Mountain Coffee Roasters ($GMCR) has proven a reliable analogue for AAPL. GMCR was a momentum boom/bust darling whose collapse arrived exactly 1 year before AAPL’s (9/2011 vs 9/2012). In brilliant symmetry, AAPL has followed GMCR’s precedent of retracing its drawdown back up to former highs–the former naturally lagging the latter’s progress by that requisite 1 year.
With AAPL gapping-down overnight here, I took the opportunity to recalibrate the comparison between these two. Using signals from each chart’s price pattern, indicators, and divergences, I find that AAPL’s downside should be ephemeral here, lasting a few days at most before resuming its hike to new 52-week highs. Thereafter, a significant bear market drawdown should occur, to the tune of ~34.5%, before another bull reversal:
As always, longer term fractals help me focus on the bigger picture. In the weekly comparison, I’m reminded not to get too greedy with our AAPL long. I plan on taking gains at new highs, obviously before that bear market begins: