I’ll admit it — I’m an Apple lover! My first smart phone was the iPhone 3GS. My next phone was an iPhone 4.

One Christmas, I was given the original iPad (Wi-Fi, 3G, 16 GB). Later on, I upgraded to the iPad 2 with the same specs.

I love my Apple products. My iPad charges by my bedside and it’s the first thing I grab with I get up in the mornings to go get ready. I’ll check the markets overnight as soon as I get up using my iPad.

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I’ll listen to Bloomberg TV streaming through the Coolstreaming app on my iPhone 4 while I’m getting ready to start my day.

These products add more value to my life than my plasma 3D TV which I watch a couple of hours a week. But there’s no telling how many hours I use my iPhone and iPad.

I also believe their stock has great fundamentals in a financial world that doesn’t have as good of fundamentals as it used to.

I love the fact that Apple literally has no debt and billions of dollars in cash on their books.

They’ve got a Return on Equity (ROE) of 45 percent which is phenomenal. They’ve got a 25.80 percent profit margin and a P/E of only 17. They’ve even announced that they’ll start paying a dividend since they have more cash on their books than they need.

So what I’m about to say may surprise you. Even though this is a great company with great fundamentals and great products that are changing the world — it’s not worth “any price.”

Heck, I love my Corvette…but it’s not worth “any price.”

There’s a price at which any asset does not make sense — and we’re there right now with Apple’s stock (AAPL).

While the S&P 500 has gained 5.84 percent for the year, Apple’s stock has gained 74.99 percent as of this writing.

It’s gone too far too fast. In fact, it’s become what Wall Street calls a “crowded trade.” It’s when almost everyone who’s going to buy at these levels has already bought. It’s where everyone’s got the same idea and they’re acting on it. That describes Apple right now.

Before it’s all said and done, I believe that Apple’s stock price will lop off $200 a share to about $420 or so, give or take $20 or so on either side.

Where do I get all of this from? Charts!

You see, a healthy trend grows at roughly a 45 degree angle. When the trend’s angle gets too steep, it’s ultimately unsustainable. Now it doesn’t mean it has to start falling tomorrow and I’d certainly not suggest someone short this stock today.

However, soon, this irrational move will come crashing down. I believe it will all unfold between now and summer.

Its uptrend line is at roughly $420 a share. So it could lop off $200 from its highest point so far and still maintain its long-term uptrend. Check it out below.

Story continues below chart

Apple Goes from the $300s to the $600s in Four Months!


Click on chart to enlarge


Another technical metric is Apple’s 200 day Simple Moving Average. Stocks typically can’t veer too far away from that long-term average for too long without correcting back down to that area. Well, its 200 day SMA is back at $440.

Now some may say, “Yeah, but sometimes a stock that goes nuts will go sideways instead of plummeting.”

And that would be correct. However, that’s what Apple did the last time it got ahead of itself. In technical analysis, there’s a “rule of alternation” which states that if a stock consolidates sideways previously, then the stock is most likely to have a sizable pullback the next time.

I’m putting that in layman’s terms. The rule is actually more technical than that. However, you’ll see toward the middle of the chart above that when Apple got ahead of itself last time that it treaded water sideways for many months on end.

Therefore, this time, a huge pullback is the more likely scenario. The pullback will typically at least go back to the uptrend line or 200 day SMA. That’s where I get that Apple will likely shed $200 off of its stock price.

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Now I know that many people will consider this to be ludicrous. And that’s why they’re still buying up Apple’s stock in the $600s. They can’t see a day when it will come down because it’s almost been a “straight line up” for months now. However, it’s that unsustainable trajectory that is the clue that a coming mini-crash in its stock is coming.

Ultimately, Apple will end up doing great. It makes great products with a huge market share and awesome branding. Their earnings momentum is great and their cash position with no debt is phenomenal.

But Apple isn’t worth $600 today. It would be like me saying my Corvette is worth $200,000. It’s just not so.

Investors have gotten in a bit of a frenzy here in gobbling up Apple’s stock too much and sending it into the stratosphere. That will soon change. It may not be Monday or next week. I can’t tell you the top is in place or that the frenzy won’t go a bit further. It certainly can.

However, I’ve seen this play out in markets too many times. And when Apple’s stock takes this huge dive…it’s going to hurt the sentiment in the stock market overall and bring down the S&P 500 with it.

That in turn will affect many currencies and commodities too by bringing them down lower at the same time. So before it’s all said and done, this will cause a bit of a chain reaction until Apple’s stock finally stabilizes once again.

So get ready! It’s coming!

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.