Barry Ritholtz: Apple’s Stock is a Bear Trap

Barry Ritholtz, the chief executive of business advisory firm Fusion IQ, predicted back in November that Apple (NASDAQ:AAPL) could drop to the $500 level in the next few months. Now that the iPhone maker, struggling after reports of lowered device demand and margin worries, is at that level, Ritholtz is the last person to be surprised, but he does have a warning for those predicting eternal doom for the company.

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The money manager, who invests in Apple and calls himself the company’s “fan boy,” said that he could see the stock touching as low as $350 based on technical indicators, though that scenario only held an “outside possibility” of coming true. In fact, at the moment the stock looked like it was setting up as a “bear trap” ahead of the company’s earnings next week, according to Ritholtz. “I’d rather not be short here,” he told Yahoo Finance’s The Daily Ticker. “I’m not excited about being long, but there’s such risk this thing could explode to the upside.”

Apple fell below $500 on Tuesday, closing at $485.92 to be more than 30 percent below peak highs reached in mid-September and at its lowest level since February 2012. It has already dropped 9 percent year-to-date, while the S&P 500 enjoys a 3 percent year-to-date growth.

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Apple was “over-owned” and “over-loved” all this time, according to Ritholtz, who blamed the hundreds of hedge funds that made the company their top-10 holding. “Some of the refusal to even consider the possibility of a correction in Apple is a stark reminder of the dangers of allowing emotions to drive your investment decisions,” the money manager said.

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