Exactly one year ago today, I wrote a piece titled “Has Apple Finally Reached Its Peak?” I listed reasons why it was going to be tough sledding for the bulls going forward. Of course, it is obvious now, but a year ago the thought that AAPL could even go down was meet with extreme anger. That right there told me I was on to something.
As the great contrarian Humphrey B Neill said, “The public is right during the trends, but wrong at both ends!”
Let’s just say this wasn’t one of my more popular pieces, as the masses wanted nothing to do with it. My pal JC Parets wrote something similar around the same time and he noted he had never received as much hate as he did for that call. I saw similar sentiment.
Well, over the past year, AAPL has lost a staggering 26%, while the SPX has soared 17% to new all-time highs.
It is always nice when things work out, but it is even more important to review it closely to find exactly what worked so well. With that, here is what I said a year ago.
Schaeffer’s Senior Technical Strategist points out an ominous indicator on AAPL
by Ryan Detrick 10/2/2012 7:56 AM
One of my favorite technical indicators to follow closely in order to nail a potential top or bottom in price is a doji. You can see them when you look at candlestick charts. I like to use candlesticks because they give a better feel for the intraday activity. Now dojis are simply a close at the exact same price as an open. They indicate indecision, and can look like a cross or a plus sign a lot of times. But what I also like about them is they tend to show up at the end of major trends. One of the most famous in recent memory is when the iShares Silver Trust (ETF) (NYSEARCA:SLV) formed one on a weekly chart right when silver was busy forming a major peak in April 2011.Chart courtesy of StockCharts.com
One other thing I like about dojis is when they show up on a weekly chart (like on SLV’s above), or even a more longer-term monthly chart — this is usually all the more powerful. Sure, I use them on daily charts for the short-term trading I do here at Schaeffer’s Investment Research, but from a bigger picture perspective, the longer-term the chart, the more significant the signal could be. In fact, I used them back in early April to nail the April peak on the SPDR S&P 500 ETF (NYSEARCA:SPY), and the subsequent 10% correction. If something works for me a few times, I tend to use it more and more.
Which brings us to everyone’s favorite stock, Apple Inc. (NASDAQ:AAPL). A lot of people have been burned trying to pick a top in this one, let’s get that out of the way right off the bat. Still, charts don’t lie, and AAPL could be in the process of a very bearish formation.
Turning to a monthly chart, last month it formed a perfect looking doji. But not just any doji, it made a gravestone doji. As the name might suggest, this pattern isn’t one to get all bulled up over, and could suggest a lot of pain is coming soon. You can read more about this formation here.Chart courtesy of StockCharts.com
Now, what’s important to remember is no indicator is flawless, and betting against AAPL has been one of the dumber investment ideas over the past few years. Nonetheless, should AAPL continue to weaken here, it could suggest this one has a long way to fall before it bottoms.