Mad Money

Seeking opportunity, Cramer eyes Apple decline


As investors sell winners to raise cash ahead of the Alibaba IPO, you may be tempted to go shopping. But just because a stock is lower doesn't necessarily make it bargain.

For example, both Apple and Amazon have recently declined, but according to technical analysis from Carolyn Boroden, only one of them is a buy.

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Looking at the chart patterns, Boroden thinks Apple made a so-called pivotal low when it traded down to $96 and change last Tuesday. She says that as long as Apple stays above that Sept. 9 low of $96 and change, it should keep heading higher. However if the level doesn't hold, then Boroden would reassess.

However, Boroden thinks the path of least resistance is probably higher, in part because of the Fibonacci time cycles clustered between Sept. 8 and Sept. 11. These clusters suggest to Boroden that the trend should change. Because Apple was pulling back going into its Sept. 9 low, the trend change, in this case, should be higher.

How high could go?

Using Fibonacci analysis, Boroden thinks Apple could run up to $113 based on a 127.2 percent extension of Apple's swing into its April of 2013 lows, or it could go even higher, to $128 based on a 161.8 percent extension of that same move. (Both 127.2 and 161.8 are Fibonacci ratios)

Either way, Boroden thinks Apple has some healthy upside from here and she suggests buying strategically on any Alibaba inspired pullback.


Looking at Amazon's daily chart, Boroden is far more skeptical.

Using Fibonacci based analysis Boroden notes that Amazon hit a wall of resistance between $349 and $352, a level at which there are a cluster of Fibonacci price relationships. Also, she says there are four Fibonacci time cycles that suggested Amazon should change course somewhere between Sept. 3 and Sept. 5—and it peaked on Sept. 4. To Boroden, that peak was a pivotal high, and because Amazon was unable to clear the ceiling of resistance above $349, the path of least resistance should be lower.

To make matters worse, Boroden says is currently trading below its key 200-day and 50-day moving averages, a bearish chart pattern.

All told, Boroden thinks Amazon is vulnerable to a continued decline. Unlike Apple, Boroden does not think Amazon is the kind of stock you want to buy into the current Alibaba induced weakness.

Read more from Mad Money with Jim Cramer
Intriguing situation creates opportunity
Tech investors face Alibaba headache
Big changes should generate 25% gain

Jim Cramer agrees, "Based on the fundamentals, you know I think Apple is a core holding that you simply own, but Amazon is a lot more risky," he said.

Call Cramer: 1-800-743-CNBC

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