AAPL-The Crowd Mentality

I have been warning about AAPL all of 2012, the late April decline I said was a defining moment for AAPL and only in the future looking back would people realize it; we are now below those levels.

Here's the area I was talking about...

I caught a LOT of flack from AAPL longs and lovers for saying what I said because everyone thinks in terms of what a stock did this afternoon or the next day and if AAPL was up, well then whatever you say is dismissed and when AAPL falls, then it was just a lucky guess.



However AAPL has been on an uptrend for at least 10 years now.

Note the change in volume, a healthy uptrend sees expanding volume, declining volume is a warning sign.

As for the warnings and AAPL's performance...If I said anything the response was, "AAPL just made an all time new high". I wonder how those longs are faring now?

Take a look at AAPL performance...

The performance up to about the time I started seeing major trouble brewing long term for AAPL and the performance since.

And what was the problem I saw in AAPL? I couldn't tell you then what the real fundamental problem was, but someone saw something and as always with underlying trade, if you wait for the reason for the signal, then you have certainty, but you don't have profits.

Here was the problem (unfortunately many of the hints were on timeframes that we can't see as we have 5000 bars of history and in some of the intraday timeframes we can't go back that far.

Longer term the problem is pretty clear and when it even started, you have to remember how Wall Street thinks, "He who sells first, sells best", selling in to higher prices in a bubble is what they do, I'm not saying they were out of AAPL by 2009, not at all, but the nature of their holdings changed dramatically. A 5 day chart tells us a lot about the overall health of a company this big, but it's not tradable information, maybe long term investable.

 This 3 day chart puts a little finer point on the problem, but doesn't identify the area where something really changed.

 Here on a daily chart, the leading negative divergence in April of 2012 was really the first time it was really apparent something was changing and this is when I really started warning people about AAPL, by the top, you can see a lot of money was already gone.

An hourly chart puts an even finer point on it.

As to why, you could say the passing of Steve Jobs, you could say what I said when the IP5 came out, "This is the first release that is evolutionary rather than revolutionary" and that is what is dragging AAPL down early today, talk of declining IP5 demand.

However more than anything, I think AAPL got too big for their britches and forgot how finicky the crowd is and how strong the crowd mentality is, just ask MSFT or RIMM.  When AAPL started demanding exclusive rights to content, one of the best examples is AAPL TV which will probably never be what it could have been because of AAPL's need to have exclusive rights to content. They made a mistake with the IP5 just like MSFT did with Vista, they were laying catch up to AAPL as AAPL was playing catch-up to Samsung, then the whole Samsung, "Bite the hand that supplies" debacle. Now we are hearing about an affordable AAPL I-phone, so everyone can own a piece of the status symbol, but that's when it's no longer a status symbol.

I can see a point not too far away in which we hear about AAPL stores closing in areas, AAPL in my opinion has just found out how far they could push accommodation for mass demand while trying to maintain an exclusive status symbol and they crossed the line, once that happens the crowd can turn finicky pretty quick, Tim may be well advised to take a close look at the Blackberry, once called the "Crackberry".

No bubble lasts forever and I really do wonder how many people have lost a lot of money on AAPL since I first started warning there was trouble and how much more they'll lose in the future thinking that with AAPL, "This time it's different". It's never different with bubbles,  the growers of a rare diseased Dutch Tulip could tell you that hundreds of years ago.