"Could Apple's Run be Over?" -- Revisited

Back in Spring '08, when AAPL was making it's 2nd major test of $200, I projected that it was possibly at the end of its bull-market. We're now back at $200 and AAPL has just reported it's best earnings ever. Once again, however, I am pessimistic on AAPL's future. I believe we are within $10-20 of it's high price for the next couple years.

Above is AAPL's weekly chart. From an Elliot Wave perspective, notice that it is nearly finished with a 5-wave rally since its resurgence when Steve Jobs retook the helm as CEO in the late 1990's. Notice that throughout the bull run, up through the end of Wave3, there had been increasing volume (even at higher share prices). However, on this 5th wave advance from $85, volume has been shrinking. In Elliot Wave Principle, Robert Prechter explains, "...look for lesser volume as a rule in a fifth wave as opposed to the third." This is exactly what is happening now, not a very bullish sign going forward. My downside target range is from $50-80.

So, if we are in the fifth wave of AAPL's advance, how close is it to being finished? The wave count is a little bit unclear, but there are 5-waves up, so it could be nearly complete. It would be funny if the earnings pop left an island top in place, but I'm open to the possibility that we head a bit higher and form a topping pattern before reversal.

On a different note, I did see some bearish option activity today as well. My Jan '11 40 put on AAPL actually increased in value today, in the face of a 5% spike up. Clearly someone is willing to bid up the OTM, long-dated options on this strength.

Anyway, time will tell what happens, but I'd say risk/reward ratio is tipping in favor of selling at this point.

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