Will the Apple Panic Make Things Worse?

Apple (NASDAQ:AAPL) is already down more than 20 percent from its record high of September, but with the selloff persisting and an extraordinary volume of shares being traded this week, another 20 percent decline could still be up ahead, an analyst has said.

Why Could Apple Fall Further?

“Along with the two volume ‘spikes’ cited in my November 16 note, [Wednesday] was another volume ‘spike’ day on the downside, suggesting that the $528 support area will in fact be decisively broken on a closing basis over the near-term,” ISI analyst John Mendelson told CNBC. “My view continues to be that because the stock ran up so fast last spring, the next significant support area is $420.”

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Apple fell 6 percent on Wednesday for its worst one-day loss in four years, and though it recovered the next day, it was still more than 6 percent down for the week at the close of the trading on Thursday. About 37 million shares changed hands on Wednesday, about 70 percent more than the average daily volume for the stock.

Mendelson said the heavy trading may be signaling a mass and ongoing liquidation from investors as the year comes to a close.

Dennis Gartman of The Gartman Letter agreed, saying spikes in volume historically marked major turning points for a stock. “Technical analysts follow spikes in volume because they often signal panic selling or panic buying,” Gartman told CNBC.

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