Anybody who has been watching Apple's share prices since September 2012 would think that the company is in the midst of a huge crisis. Shares of AAPL have dropped from a high of over US$700 a share to around $400 now, and the financial press is sure that the company is doomed. Abdel Ibrahim, co-founder of The Tech Block and a technical analysis trader for about 10 years, points out that based on a look at historical data, large upswings in AAPL share price followed by swift downturns are actually quite normal for the company.
Ibrahim based his analysis on what is called Fibonacci retracements, a method of technical analysis that uses "the idea that markets will retrace a predictable portion of a move, after which they will continue to move in the original direction." In other words, the share price will rise significantly, then fall back to a lower level before starting to rise again.
"Most technical traders use the 50 percent and 61.8 percent Fibonacci levels to predict where a market may find support or resistance. For example, if a stock went from $10 to $20, and then started to significantly pull back, many technical traders would expect that stock to have a lot of support somewhere in between $14 - $15 (roughly 50 percent to 61.8 percent of the $10 move). In my personal analysis (emphasis is Ibrahim's) I have found this to be true nearly 70 percent of the time."
Ibrahim then follows with AAPL chart examples demonstrating this recurring trend. It happened between late 1997 and late 1999, in 2005 into 2006, then late 2006 through early 2008. Since that time, AAPL has been following the same trend and is currently on the downward path it has followed so many times before.
As Ibrahim notes, the charts he's created aren't meant to stir investors to buy AAPL. Instead:
"It's to tell you to ignore the bullshit headlines that seem to be flooding the internet and newspapers. They come from analysts. Analysts with agendas to either inflate the price of a stock they own or deflate the price of a stock they want. ... Apple, in my eyes, is still a very good company. Time will tell if I'm right or wrong."
If you'd like to hear what some of those analysts with agendas are asking Apple executives, be sure to join us at 4:50 PM ET today for our liveblog of the company's Q2 2013 earnings call.
[Via The Loop]