In May 2016, Apple stock fell slightly below the $90 mark. Yesterday, August 15th, 2017, shares climbed as high as $162.20 for a total gain of 81.2% in just 15 months. One of Apple’s largest shareholders, Warren Buffett’s Berkshire Hathaway, took a huge advantage of this surge by buying AAPL shares when they were priced down due to weak iPhone sales in 2016. Obviously, buying quality companies at a low price leads to good results. However, even the greatest company might lose you money if you buy in at the wrong time. Here, we think Apple is too pricey near $160.
The chart above shows Apple’s progress since the bottom at $89.47 in May 2016. As visible, the stock’s rally to $162.20 could already be seen as a complete five-wave impulse pattern. According to the Elliott Wave Principle, every impulse is followed by a three-wave correction in the other direction. So, before the uptrend could continue, a noteworthy retracement is likely to occur. The short-term negative outlook is also supported by the relative strength index, which shows a strong bearish divergence between waves 3 and 5.
Apple is the biggest company in the world with one of the strongest brands. In the long run, Tim Cook’s enterprise is almost certain to continue prospering. But this does not mean that occasional disappointments are impossible. It looks like we should get ready for one very soon. From an Elliott Wave standpoint, a return to the $130s would not be a big surprise. With stocks, the higher they go, the riskier they become. Even Apple could be a risky investment, if the price is too high.