The persistent bearish price action in shares of Apple
) is continuing on Wednesday. The stock traded higher in the
pre-market based on reports that the company is in the early
stages of testing for an Apple TV.
According to the Wall Street Journal, Sharp and Foxconn are
working with Apple to test designs for a large-screen, high
resolution television. The report cited unnamed officials wired
into the company's supply chain.
The report further states that Apple has been experimenting
with television prototypes "for a number of years." It isn't a
formal project yet. It is still in the early stage of testing,"
one of the sources told the Journal. Rumors about an Apple TV
have been in the marketplace for a while now, although they have
not risen above the level of speculation.
The company, which already makes a set-top box which connects
online media to traditional television sets, has done little to
dissuade the rumors. In a recent
interview with NBC
, Apple CEO Tim Cook intimated that a TV may be on its way. "When
I go into my living room and turn on the TV, I feel like I have
gone backwards in time by 20 to 30 years," Cook said. "It's an
area of intense interest. I can't say more than that."
The stock rose in Wednesday's pre-market session as traders
speculated that the report could be enough to trigger a rally in
the stock. Shares opened at $547.77, but those gains evaporated.
At last check, AAPL was trading down 0.22 percent to $540.00.
Wednesday's bearish price action in the world's largest company
comes despite a rally in the broader market, with the Dow rising
50 points and the S&P climbing better than 0.50 percent. Due
to Apple's underperformance, however, the Nasdaq was only up 0.23
percent heading into the final hour of trade.
Apple has been weighing on the entire Nasdaq Composite for
months now. The stock is down more than 19 percent in three
months time after hitting an all-time high above $700.00 in
September. The losses have captivated Wall Street which has spent
the last few years cheering the stock's meteoric rise. On a
fundamental basis, the sell-off in the name does not seem to be
entirely justified. The stock continues to trade at a very cheap
valuation -- its forward P/E is under 10 and its PEG ratio is
From a pure supply/demand perspective, however, Apple could
continue to plunge in the near-term. The stock is so heavily
owned by fast money traders and hedge funds that the selling
momentum appears to be feeding on itself. When everyone is
already long a stock, it implies that there are few marginal
buyers left. Subsequently, when large investors begin to sell, it
can trigger large declines.
Going forward, a key level in Apple will be in vicinity of
$525.00 - $530.00. This is where the stock found support back in
May during another sharp pull-back. This is also the price band
where Apple bounced from in mid-November. Given the continued
bearish price action in the name, it is likely that the stock
could see these levels on Thursday or Friday.
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