After making geniuses out of shareholders for the last decade, Apple (AAPL) is suddenly beating loyalists with an oar. With the shares off 30% from September's closing highs over $700, the question for the newly chastened bulls isn't "how high can Apple go?" but rather "when will this pain end?" Breakout friend and national treasure Louise Yamada of LY Technical Advisors has an answer that the bulls may not want to hear.
Yamada sees Apple sitting on its uptrend and could bounce all the way to $528 but that's all the good news she has. Bigger picture she thinks the stock is broken and unlikely to come back. "The interesting thing about this decline in Apple is that it's the first one that's followed through," she notes in the attached video. "Prior declines during this whole uptrend had Apple looking like it wanted to correct and it just turned around and went up."
None of which makes Apple a short. Yamada points to the weak hands now long the stock and suddenly underwater. When shareholders' faith gets tested in such a way they tend to start playing the hope trade as in "I hope Apple gets back to the $528 level Louise was talking about so I can sell." That creates a lot of selling pressure, making it harder for shares to make a meaningful comeback in the short term.
Using a different metaphor, once beloved stocks are broken they behave like a dying fish in the bottom of a canoe. There's no telling which way it's going to flop next, but whether you try to grab it to kill it (short) or throw it back (buy), you're probably going to get yourself hurt.
Sometimes the best play is to just sit back and let nature take it's course.