Are Apple Shorts to Blame for the Avalanche?

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Can Apple’s (NASDAQ:AAPL) seemingly uncontrolled and continuing drop from its September peak be explained on short sellers hounding the stock? Easily, according to data from S&P Capital IQ.

The research firm found that the number of Apple shares sold short went up from 13.6 million at the end of August to more than 21 million in mid-November, the highest in four years. That represented an increase in bearish sentiment of 59 percent over less than three months. While the number dropped to 17.9 million at the end of the year, it was still among the highest levels of 2012. And while short interest equaled only 1.9 percent of total shares outstanding, the rapid growth in it made its mark. (See graph from S&P Capital IQ)

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Apple Shorts

“The shorts continue to pound the stock,” Banyan Partners’ Robert Pavlik told The Wall Street Journal. Several of Banyan’s accounts own Apple shares and added exposure in the dying portions of 2012. But Apple has continued to fall in the New Year and dipped below $500 earlier this week, making Pavlik nervous. “I think you have to really watch it now,” he said. “The downside pressure is prevalent and the technicals just do not look good on this right now.”

With respect to Apple’s stock price technical chart since 2006, here’s how the correlation to the chart above looks after today’s close at $502.68:

Screen Shot 2013-01-17 at 8.20.35 PM

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