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Apple’s Technical Breakdown (AAPL)

On Friday, Apple Inc. ( AAPL ) crossed below its 200-day moving average (DMA) for the first time since June of 2011. This move has put investors on edge as the mega-cap tech darling is now seeing struggles that might inhibit growth in the near future.

Review: What Is A Moving Average?

A moving average is used in statistical analysis to measure price trends. Simply put, a moving average is the average value of a stock's price over a given period of time. The 200-day moving average is a long-term indicator to show momentum of a stock as well as the possible areas of technical support and resistance. Investors compare the current stock price to the stock's moving average at that time to determine in what direction one can expect for that stock in the future.

Typically, if the 200-day moving average is below the current price of a stock, that means that there is technical support for the stock; the stock price will have a hard time trading below it. However, crossing below that 200 DMA is not impossible. If the stock does cross below the 200 DMA then there is said to be overhead resistance for the stock to trade above it. Apple now faces this struggle after closing on Friday.

What Apple's 200 Day Moving Average Is Telling Investors

Apple is now in the position below its 200 DMA; it closed on Friday at $576.80 below the 200 DMA of $590.33. The stock might have trouble to break that threshold and reach the tremendous stock values that firm saw earlier this year. At best the stock might hover around this $590 price range for a bit, struggling to burst through the ceiling. This is just the latest instance of Apple stock going through its wild up and downs; perhaps the stock is not in the position to make the substantial growth as it has seen in the past couple of years.

Apple has had its share of volatility this year. At the beginning of 2012 Apple was trading at $411.23. In a little over three months Apple appreciated +54.7%, closing on April 9th at $636.23. After that, however, the stock dropped -16.7% to $530.12 on May 17th. But then over the next four months Apple shares would appreciate to its all-time highs, closing at $702.10 on September 10th - a +32.4% increase. Since that high, Apple has struggled with shares falling -17.8% to $576.80, when it crossed below its 200 day moving average for the first time in over a year. It now faces the possibility of finishing as one of the worst large-cap performers in the fourth quarter.

These ups and downs illustrate how Apple has gone through quite a year. Overall the stock price is up +43.98% since the start of 2012, a statistic that most firms would not mind to see. But the peaks and valleys that the share price has gone through make investors wary, especially looking towards the future. It does not help now that the company's stock has also dipped below its 200 DMA price support.

Stock Bulls and Bears Make Money; Pigs Get Slaughtered

The volatility of Apple stock has been the subject of a lot of speculation on Wall Street. There are bulls and bears expecting very different outcomes for the firm in the near future. Despite Apple flirting with its 200 day moving average, many investors have still been optimistic that the stock would bounce back. The stock's big moves have had ripple effects throughout the markets and financial industry in general. In fact, Rochdale Securities, home of famous analyst Dick Bove, is now seeking some sort of bailout after it made a bad trade on Apple, expecting the stock to go back up. The move has crippled the investment firm, which is now seeking outside assistance to keep it afloat.

Still, many investors and analyst remain incredibly bullish on the stock. This sort of optimism is a testament to how well the Apple brand itself is doing worldwide. Regardless of the financial situation, technical analysis, and market trends, people still want to believe that the computer giant will pull through.

The Bottom Line

Regardless of the technical analysis and investor opinions, Apple will probably continue to experience its wild swing. Recent history has shown Wall Street that AAPL is a momentum stock, despite its high share price, large long-term investor base, and recently-initiated dividend payout. Apple might not reach its $700 share price levels that it saw just a couple months ago, but that does not necessarily mean Apple will see a steep drop in price either. Investors just need to understand that a close eye must be kept on the stock as small fluctuations in the market can make or break Apple right now. Apple is facing many concerns moving forward; the stock falling below its 200 day moving average is just the latest of these investor concerns.

Apple Inc. ( AAPL ) is not recommended at this time, holding a DARS™ Rating of 3.4 out of 5 stars.

Be sure to visit our complete recommended list of the Best Dividend Stocks , as well as a detailed explanation of our ratings system here .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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