Apple Inc. (AAPL): What’s The Stock’s Downside?

Apple Inc. (NASDAQ:AAPL) has had a rough time in the back half of 2012. Over the past three months, shares of the tech giant have lost 19.6%, and experienced a six-plus percentage point decline yesterday. While analysts can go back and forth on the exact causes of Apple’s selloff, the fact remains that from a technical standpoint, there are some bearish indicators.

Aside from trading ever so close to the so-called “death cross,” (see Should You Trade Apple Near the Death Cross?) which occurs when a stock’s 50-day moving average falls below its 200-day moving average, some on Wall Street think that heavy volume in Apple Inc. (NASDAQ:AAPL) shares means more selling may be on the horizon.

Originally reported by Barron’s, ISI Group’s Brian Marshall, who was discussing the research of his firm’s technical analyst John Mendelson, had this to say about shares of AAPL:

“His analysis indicates yesterday was another volume “spike” day on the downside suggesting that the $528 support area will be decisively broken. He believes that because the stock ran up so fast last spring, the next significant support area is at $420.”

While “Marshall himself believes the stock should be bought on the current weakness,” (via Barron’s), this is shaping up to be a battle of the technicals versus the fundamentals. Regarding the latter, shares of Apple Inc. (NASDAQ:AAPL) obviously trade at an attractive valuation — you’d be hard pressed to think otherwise at 9.3 times forward earnings and a PEG of 0.62 — but it’s difficult to ignore the technical indicators.

On this topic, CNBC insightfully reports that Mendelson “was ranked 19 times in that field [technical analysis] by Institutional Investor magazine over his long career,” saying that it’s common to “look at volume to gauge changes in supply and demand for a stock […] because the heavy trading is occurring as Apple is falling, it may be signaling a mass, ongoing liquidation as the year comes to a close.”

While this forecast is sure to be heavily debated on the blogosphere, Apple Inc. (NASDAQ:AAPL) is still a behemoth over the long run, but there are obvious near term headwinds as we approach the fiscal cliff. Let us know how you’re trading Apple in the comments section below; don’t be afraid to speak up.