Apple’s Death Cross Doesn’t Scare This Analyst
Investors and Apple (NASDAQ:AAPL) watchers spent the bad day for the company worrying about the possibility that the stock was on its way to hitting the death cross. That technical marker occurs when a stock’s 50-day moving average crosses its 200-day moving average, and usually leads to further weakness. Apple’s 50-day price average is $608.41 at the moment, while its 200-day average is $600.91. However, Piper Jaffray analyst Gene Munster, a known Apple bull, is not in the least worried about any impending danger to the stock.
What Danger is Apple In?
“Apple’s simple 50-day moving average is nearing its 200-day moving average, which is a negative technical sign,” Munster told Barron’s in an interview. “Based on our conversation with Piper Jaffray technical analyst Craig Johnson, we believe that for this technical indication, most of the damage has been done to Apple, but there could be a worst case additional 10 percent move to the downside, which could be the next meaningful area of support.”
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According to the analyst, the stock should be able to avoid an additional 10 percent downside despite the technical issues because of historical performance.
How Could Apple Be Affected?
In addition, the possibility of higher-margin requirements on trading Apple, which was also a cause of pessimism on Wednesday, was also “not a big deal,” Munster told Barron’s. The announcement that Nokia (NYSE:NOK) had entered into a partnership with China Mobile (NYSE:CHL), another point that was hurting Apple’s stock, was also not as important as it had been made out to be, the analyst said.
Just because the carrier had made a deal with the Finnish phone company, it did not mean that a partnership with Apple wouldn’t happen. “Why would it need to be mutually exclusive?” Munster asked. For a wireless provider to carry multiple devices was normal course of business, he added.
Collin Monsarrat, an analyst at Birinyi Associates, also pointed out that Apple shares had reacted positively after each of the five death crosses it has seen since November 2000. “The data is fairly inconclusive, but if it shows anything, it is that a death cross implies better performance,” Monsarrat told The Wall Street Journal. “The stock has tended to struggle for the week and month following the cross, but three months later the stock has tended to be not only up but outperform the S&P 500 60 percent of the time.”
Munster and Monsarrat were reacting to Apple’s fall of 6.43 percent on Wednesday that took the stock to $538.79.
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