On Wednesday, Apple (AAPL) stock fell $37.05 or 6.43%. In after-hours the stock continued to fall and it was down as low as $518 this morning. Yesterday Apple suffered its largest one-day loss in four years.
There are a variety of explanations for the tumble offered by talking heads, ranging from a research report to a technical death cross. The real reason was forced selling based on margin calls. There is strong anecdotal evidence that a large number of buyers near the recent swing high in the zone of $570 to $590 were short-term speculators buying on margin.
A small firm, COR Clearing, raised margin requirements on Apple from 30% to 60%. There were rumors all day long about other firms also potentially raising margin requirements on Apple.
My systems at The Arora Report monitor every tick of Apple stock trading; dissect this data and feed the data into complex algorithms that attempt to decipher reasons behind the trades. These algorithms are based on a ton of historical data and trading patterns related to a variety of trading scenarios such as forced selling and short squeezes, as well as actions of smart money and actions of the momentum crowd.
In an over-owned stock like Apple, selling almost begets more selling. As the stock fell, market technicians started fretting about a death cross. A death cross occurs when the simple 50-day moving average crosses below the 200-day moving average. In traditional technical analysis this is considered a negative signal. My testing shows that this signal is this is backward-looking and not very useful, but since a large number of people believe it, they act on it resulting in a self-fulfilling prophecy…Read more at Forbes