There has been a tremendous amount of hype surrounding Apple’s release of the new iPad. The media attention comes after another blowout earnings quarter for AAPL. Apple is sitting on a huge amount of cash, consistently beats on earnings, and is probably the most innovative of our large cap technology companies. Personally, I have an iPhone, which is with me wherever I go. I am typing this blog post on a MacBook Pro. I love this computer, and have long been a satisfied Apple customer.

But I’m not bullish on the stock, at least for now. First, the broader market looks sick right here, as we experience another day of brutal selling after some tepid buying earlier in the week. Second, if we look at the AAPL chart, it is looking toppy.

Checking out the AAPL daily chart, we can see that price got a brief boost after the earnings beat in October, but then failed to follow through until price briefly made a new high in December. We saw a flurry of trading activity after the January earnings report, but then price has again sunk back to the support level that goes back to October. Considering this action during the past several months, along with the current distribution taking place in the broader market, odds would seem to favor a break of support in the 187.00, and a test of the 200 day moving average around 175.00.

Investors should carefully watch the consumer reactions to the iPad. Over at TradeKing, bigdog summarizes some of the reviews so far, including $499 price point, and the iPad features. The major complaint I have been hearing, pre-release, is that the iPad is simply a large iPhone, and therefore nothing revolutionary.

I also own a Kindle, which I use on a daily basis. Personally I think the Kindle is a clunky device, but it has the distinct advantage of E Ink (readability), long battery life, and vast quantities of available content. The Kindle is simple and utilitarian, but it gets the job done, particularly for students and travelers. I live in Brazil and travel frequently. The Kindle has given me access to much more reading content than I would otherwise have, and it is portable. My guess is that Amazon will need to cut the price of the Kindle, or somehow significantly upgrade its capabilities, and I’m not sure they have the engineering team to do the latter. If the Kindle gets below $150, we will be talking about very different markets for the two products.

Which brings the question: what exactly is the market for the iPad? What niche does it fill? With the jury still out on these questions, and the chart displaying some very questionable technical action, conditions look bearish for the stock in the immediate future.

Looking further out, Apple is still selling plenty of iPhones, and is continually gaining market share in the personal computer space. Apple is a quality company, and one I would generally recommend for long-term investors. I just think the long-term investor is going to have the opportunity to buy shares at a significantly lower price.

Tags: aapl, Apple Computer, iPad, iPhone, Kindle

This entry was posted on Thursday, February 4th, 2010 at 5:32 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.