Apple: Death Cross Doom Or Generational Buy?

When the mainstream media is not discussing the perils of going over the “Fiscal Cliff”, they are most likely discussing the recent price action in Apple AAPL The technical term, “Death Cross”(when the 50 day moving average falls below the 200 day moving average) has been the basis for the bears arguments. In contrast, commentators on “Fast Money” have cited the recent decline as an opportunity for a “generational buy”. Since I am not a believer in either the “Death Cross” or “generational buys”, here is my technical outlook on AAPL.
After making an all time high at $705.07 on September 21st, AAPL has sold off to the $500 area on two separate occasions but rebounded both times. On the first occasion, the rebound surged the stock to nearly 600. However, the bounce off the recent low has been muted as AAPL has stalled in the 530’s. The lack of follow through on the recent rebound may be a cause for concern for long-term AAPL bulls.
The bears who predicted the demise of AAPL after the passing of Steve Jobs were dead wrong. However, many of those bears argued that the product pipeline may begin to dwindle without Jobs. That scenario may now be coming to fruition. After riding the coattails of the iPhone 5 launch, AAPL has encountered a few hiccups. The iMaps application debacle showed that Apple products are not perfect, and led to some shakeups in mid-level management. Wall Street analysts have been jumping off the bandwagon recently, as they continue to lower their price targets for the stock on a seemingly daily basis. If Tim Cook wants to shift sentiment back in his favor, I suggest he accelerate the development and deployment of Apple TV, or the exodus from the AAPL bandwagon may begin to accelerate.
Technically speaking, the longer AAPL takes to get back to 550 and maintain that level, the better the chances the 500 level is in jeopardy, and there is not a lot of support in the 400 handle. During AAPL’s ascent to 700, it spent very little time trading in the 400 handle. In fact, it took less than two months to go from 400-500. Therefore, if AAPL does breach 500, there are limited areas of major support which may result in “vacuum” trading action similar to the way it traded during its rally through that area. It is critical that the stock holds the 500 level.

On the other hand, those relying on the Fast Money commentators and putting all their money, their children’s money, and anyone else related to them in AAPL stock, you may be right. There is no doubt that the revenue stream from current AAPL products will produce decent earnings for the next few quarters, but the long term outlook will be determined by the deployment of new products. Once everyone has an iPhone, or an iPad, AAPL will need to come up with something new to drive earnings growth. Keep your fingers and toes crossed that Apple TV will do the trick. Otherwise, that 500 level might be breached, and if that happens, expect the trading herd to stampede for the exits as the stock cascades through the 400 handle.