Now that Apple (AAPL) has broken through the $500 level, many are wondering where the bottom is.
Apple bear Jeff Gundlach has a price target of $425. I have to give credit to Gundlach. He's been right as rain since September with his bearishness as the stock has fallen to $486 from $705. (In fairness, Gundlach first became very bearish against Apple back in the $500s before it ramped up to its all-time high and then started coming down again. Nobody remembers that now, so Gundlach's call looks spot on.)
Will it get that low? I'm not sure, although I believed that $500 was really going to be the bottom of the trough.
I sat in on a really interesting webinar with Dan Nathan of Risk Reversal yesterday. Both he and Enis Tanner felt that, at $500, Apple was really in noman's land. From a technical perspective, they both felt that that stock had further to fall, possibly to the $450 level.
At those levels, both felt that Apple would be a really interesting buy.
Will it be Apple earnings in 10 days that helps to spark a rally? Possibly.
There's certainly a lot of overhang right now after the Journal story earlier this week suggesting demand for the iPhone 5 was drying up. It's hard to see how that's going to be resolved until Tim Cook actually gets on the earnings call and starts to give some color commentary to the demand he's seeing.
Sometimes the reaction in Apple's stock to the earnings announcement can jump around on the first day or so afterwards, but really only start to show a directional trend a few days after all the analysts have come out with their take.
No one knows, but I'd say the $450 level would be very interesting to get long the stock or increase your position. I was waiting for the fiscal cliff drama to resolve itself. It did, but then I still couldn't get comfortable to buy more Apple stock at the beginning of the year.
But I think the $450 level would be a very interesting point of entry. That would represent a 36% decline from the recent high. Apple has seen bigger drops than that over the last eight years, but that's definitely on the higher end of the scale.
Is it frustrating for the Apple longs to see the stock consistently underperform the market day after day? Sure. But who was complaining last spring and summer when Apple was beating the market every day?