Apple drops under $600; is the moon ride over for investors?

Shares of Apple are down over 2% on Wednesday, the first chance investors have had to react to the recent management shake up at Apple as the market had been closed on Monday and Tuesday thanks to Hurricane Sandy. The drop in the stock of over $13 has brought Apple under the $600 level to $590. The last time the stock traded at this level was in July when the shares were moving higher toward its 52 week high at $705 which was hit on September 21st, the exact day of the Apple iPhone 5 launch.

Apple's shares are right on the 200 day moving average

It has been quite a ride for Apple as we can recall the shares trading in the $12 range back in the days when John Sculley was running the shop. No stock runs up forever and the history of Wall Street is littered with companies that had innovative products eventually seeing their stock drop back to earth. In the 1920's, when radio was the internet of its day, RCA caught the attention of investors before crashing in 1929 with all other shares. In the 1960's, color television was the buzz word along with automatic bowling pin-resetters. Companies like Sylvania and Brunswick soared and plunged. In the 1980's, Home Shopping Network made millionaires out of some investors, but subsequently ruined others. And who could forget the internet boom in the 1990's when so many stocks ran up sharply, only to drop just as fast when the bubble burst.

Of course, Apple has been making money and lots of it. But investors want to see growth expanding, not contracting. And since Wall Street is said to look ahead 6-9 months, Apple's shares could be warning us that times won't be so good for the company by next spring. Or, it could merely be some profit taking. With a stock that runs on momentum like Apple, all it takes is one person deciding to cash in to buy an Apple iPhone 5 to set off a chain reaction of sellers.

For what it's worth, back in April we told you how one analyst who uses the complicated Elliott Wave form of technical analysis was calling for the shares to drop to $510. If this does happen, we would call it the broken clock form of analysis because the stock soared over $100 points higher first. Remember, even a broken clock is right twice a day. For those bullish on the stock, the good news is that the shares have hit the 200 day moving average which often presents a short-term bottom and a buying opportunity for Wall Street players. The last time the 200 day line was touched was last December with the stock trading around $360.