Apple dropped below 623.55 on Friday and that marked a 5 wave decline on a small degree. We know that when a market declines in 5 waves it normally happens to be a part of a bigger move.
With that in mind, let us look at the bigger picture – the real big picture. As shown in the monthly charts below, it is possible to count 5 waves from the 1997 low. And at the top of wave 5 a clear drop in momentum readings – a disagreement between price and momentum.
Let us zoom in little more closer – the weekly charts. The 5th wave starting from the 2009 low can be interpreted in a couple of ways.
My interpretation is that the first wave within the 5th was extended. In that case we have a perfect ending relationship – Waves 3+5 are 0.382 times extended wave 1. The momentum divergence here is more pronounced than on the monthly charts. So there is a good chance that the top 705 was a wave 5 top.
Seeing the above evidence, I lean towards the possibility that AAPL has seen a MASSIVE TOP, a 5th of a 5th. If I’m right, we are possibly looking at AAPL declining to $80 in the next 3-4 years. Either AAPL will burn cash or competition will crush AAPL or some other form of roadblock could be the reason but we are not bothered about the reasons. Reasons will come later. Think such a decline is not possible? Think Nortel, Juniper, Himachal Futuristic, Satyam to name a few. Short term: Apple could bounce from sub 600 to 650-674, if it does, I think it will be a low risk selling opportunity.
The broader implication if this analysis is correct – the world is up for some nasty months.
Disclosure: I’m short Apple. I own a couple of Iphones and an Ipad and I will be Queuing up for Apple’s mini Ipad.