Can This Death Cross Kill Off Apple?

The looming risk of a so-called “death cross” is making Apple’s (NASDAQ:AAPL) bad day worse as the technical factor threatens to cast a darker shadow on the stock. Apple dropped a massive 6.43 percent on Wednesday to $538.79, marking the third time in nearly six months that shares have slipped below the $550 mark.

What is the Point That Apple Should Watch Out For?

The death cross scenario worrying investors refers to a situation where a stock’s 50-day moving average falls below its 200-day moving average. Its 50-day price average is $608.41 currently, while its 200-day average is $600.91. If Apple kept dropping value on current trends, it could reach that point by the end of the week, according to The Wall Street Journal. It would be the first death cross for Apple since the end of 2008. There was also talk on Wednesday that a few clearing firms had raised the “margin requirement” for those trading Apple, a move that has the potential to limit buys.

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CHEAT SHEET Analysis: Catalysts for a Stock’s Movement

One of the key aspects of our CHEAT SHEET investing framework is the factors that affect a stock’s move upward or downward. All this pessimism was far away in the distance for Apple when its shares hit record highs of above $700 in mid-September on the launch of the iPhone 5. However, the stock then proceeded to slip almost 25 percent in less than two months, with worries about the gap between the demand and supply of the new iPhone, margin concerns related to the iPad mini pricing, executive changes, and the threat of growing competition from Google (NASDAQ:GOOG), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) ending Apple’s party. While Apple’s stock had recovered from those lows in the past week, most of those gains have been cut down again. How will the stock respond next?…

How Will This Affect Apple and Its Investors?

Enis Taner of RiskReversal.com told CNBC that while the trends did not look good, all investors needed to do was to be cautious. “The technicals don’t look that good,” Taner said. “The stock has missed earnings two straight quarters, and very few people actually talk about that. You need to see Apple perform, I think, in the coming quarter before the stock is stabilized enough to buy it.”

According to Taner, there had been a shift in sentiment regarding Apple. “I think Apple’s a value stock,” he told CNBC. “It’s no longer a growth stock.”

Scott Redler, chief strategic officer at T3Live.com, agreed with Taner’s point, saying that it was no longer a given that Apple shares would head back to record highs. “The news today created a perfect storm after technical analysis already pointed to lower prices,” Redler told The WSJ. “Overall it seems the psychology of Apple has changed a bit — the perception is no longer that you can just buy all dips in Apple and close your eyes.”

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