Market leaders are the last stocks to bottom.  They have the strongest fundamentals and don’t breakdown until the pressure to get out of the market becomes so great that even they will be sold.  One such market leader is AAPL.  We talked about AAPL in today’s AM Meeting.  I remarked that we should pay close attention to AAPL’s price action to help us determine the level of fear in the market.

AAPL was weak today but wasn’t as weak as the S&P 500  overall.  The financial  stocks brought the market down today.  They were sold viciously.  Take a look at WFC, JPM, BAC and GE.  That is what capitulation looks like (but they did catch a bid right at the end of the day).  When AAPL is sold more viciously than the rest of the market it will be one of the signs of a market bottom.

AAPL closed around $80 today.  If it were to have another 10% down move from these levels I will pay close attention.  I will look for a reversal to the upside on heavy volume.  Now, this scenario may not happen.  AAPL is already incredibly cheap (they have around $30 cash per share and are projected to earn around $6 per share in 2009).  But as a trader I must constantly visualize potential trading scenarios.  This will allow me to execute without emotion if the scenario occurs.

I’ve attached a chart to give you an idea of where I think AAPL may bottom.  The first support line i’ve drawn is around $72 and the second is around $65.  Those are absurd prices for this stock.  When it gets there we will most likely be at a bottom.  At the rate we are going it will probably be in the next few days 🙂