Should You Trade Apple Inc. (AAPL) Near The ‘Death Cross’?

Apple Inc. (NASDAQ:AAPL) has had one of its worst days in recent memory, losing over 5% since the opening bell thus far. Speculation over the exact reasons behind this decline have varied, and range from a raised margin requirement by certain clearing firms, to an interesting bit of research by IDC. While fundamental investors are likely seeing this sell-off as yet another opportunity to buy the tech giant, which has traded essentially flat over the past six months, there are quite a few bearish technical indicators at play (see Google vs Apple: Technicals vs Fundamentals).Apple Inc. (AAPL)

In the case of Apple Inc. (NASDAQ:AAPL)’s chart, one other piece of bearish technical news may have to do with a phenomenon known as the “death cross.” As defined by Investopedia, a death cross is a “crossover resulting from a security’s long-term moving average breaking above its short-term moving average or support level.” In this particular instance, Apple’s 50 day MA is close to going below its 200 day MA, and as the Wall Street Journal points out, “[s]uch a development would be the first death cross for Apple since the end of 2008.”

On CNBC‘s “Fast Money” segment earlier today, opinions on Apple’s downside drew varied opinions. Pete Najarian of Option Monster mentioned that the markets may be overreacting to the sell-off, stating that ”[i]t’s a $23 move on a $500, $600 stock. Let’s kind of keep a little perspective on Apple right now,” while Enis Taner of RiskReversal.com thinks investors aren’t being cautious enough.

Regarding Apple Inc. (NASDAQ:AAPL), Taner said that “[t]he stock has missed earnings two straight quarters, and very few people actually talk about that [...] you need to see Apple perform, I think, in the coming quarter before the stock is stabilized enough to buy it.”

In our opinion, the fundamentals look as solid as ever — a forward P/E below 10.0X and a PEG below 1.0 — but it’s dangerous to ignore technical indicators entirely. If Apple continues its downward move past the so-called “death cross,” value investors may very well be able to get their shares at an even cheaper level than they are now. It’s no secret that Apple Inc. (NASDAQ:AAPL) is the top stock among hedge funds, and is also the favorite among billionaire money managers, and over the long haul, we can’t argue with the smart money on this one.

What are you thoughts on Apple’s latest sell-off? Does it present an even greater value opportunity, or are you avoiding the stock as we creep closer to the fiscal cliff? Let us know in the comments section below.

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