Zacks’ Voice of the People Highlights user  globlchrtanlysis: “3 Reasons to Sell Apple” from the People & Picks community.

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3 Reasons to Sell Apple

If we were looking for the most ideal stock to buy, it would be a stock that had amazing innovation, huge brand recognition and a constant pipeline of must-have products. They would also be so creative that they invent multiple streams of revenue sources to go along with their products and they are managed by some of the best management around.

There is such a stock and you know it well — it’s called Apple (AAPL). So it sounds like the perfect company. It’s true, I like the company so much that I own most of their products myself. I‘m sure I’ll receive emails from angry Apple lovers giving me another 50 reasons to own this stock.

So are we saying sell Apple? Here is why:

Reason #1 to look at selling Apple is the market. If you believe my former employer’s research, William O’Neil & Co. and founder of Investor’s Business Daily, then 3 out of 4 stocks follow what the market does. This is true but our research shows that the numbers are much higher than 75% during the heavy selloff days and during markets that are transitioning from a Bull market to a Bear market.

Either way this is the first reason we would look to sell Apple. You may argue that Apple should and will be one of those few names that go up in a down market. Relatively speaking you may be correct so far, but this brings us to reason #2.

Reason #2 to consider selling Apple is just take a look at the chart. Apple hit new highs in April and has been trading back and forth in a 15%-20% range ever since (excluding the Flash Crash low which was much lower). On June 21, we hit a new high but that breakout failed miserably like most breakouts do in bearish markets. The rally that led up to that high was on light volume, and now the selloff seems to be accelerating on heavier and heavier volume each day.

The volume was so massive this week that it overwhelmed all buyers at the 50 day moving average and just kept going. Heavy volume breakdowns through support levels especially the 50-day moving average has historically signaled the end of a trend and lower prices to come.

…

Reason #3: everyone owns Apple. From the savviest fund managers to the novice investor. In fact, if could see inside everyone’s portfolios, I almost guarantee the common denominator stock across the board would be Apple (anyone have a good way of seeing the number of small investors who own Apple?) When everyone owns a stock, then there are no more buyers.

Here is another point we would like to make that won’t be popular. When you are in a correction or a Bear market and you run out of buyers things like book value, PE ratios, dividend yields and future estimates mean nothing. I know most of Wall Street has everyone fooled into buying on such valuations, but those measurements are worthless when there are more sellers than there are buyers.

If you can read the charts you can see about 3-6 months ahead of the fundamentals. Remember, fundamentals are always the best at the top and it isn’t until 3-6 months later when one realizes the fundamentals are getting worse that they decide to sell. Meanwhile the stock has already tanked and only those smart portfolio managers and those who can read the charts got out before the stock plummeted. A 3-6 month head start before the pure fundamentalists sells their stock, now that’s a head start everyone should be looking to get.

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