Apple 2.0

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Apple's $40 rise and fall: Was Goldman Sachs behind it?

February 18, 2012: 7:18 AM ET

Something jammed its blood funnel into Apple's share price last week 

"Goldman Sachs has engineered every major market manipulation since the Great Depression."

So wrote Rolling Stone's Matt Taibbi in his 2010 takedown of Goldman Sachs -- the article that famously described the 143-year-old banking house as "a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money."

Without ever actually accusing Goldman Sachs (GS) of manipulating Apple (AAPL) shares, Paulo Santos, a independent analyst and trader from Portugal, makes a plausible case that the bizzarre action in Apple last week -- rocketing to a record $526.29 on Wednesday morning only to plummet to as low $486.63 -- can be traced to insider knowledge that Tim Cook was going to speak at a Goldman Sachs conference on Tuesday, which is when Wednesday's run-up began.

It doesn't matter so much what Cook said, Santos argues in a Seeking Alpha piece posted Friday, as when it was known that he would be speaking at all. That news was announced on Monday, accompanied by a small Apple gap up.

"But now we have to wonder," Santos writes, "when did the organizers of that conference have the certainty that Tim Cook would be present and giving his keynote address?" I quote:

Could it have been the Thursday before, where Apple not only gapped up, but traded notable volume as well? Indeed, on the run up to [Wednesday] there were several unnatural peaks in volume, some only comparable to what you see after an earnings release.

So, from the looks of this, what seems most likely to have happened, is that someone accumulated a large Apple position based on the knowledge that he'd have a catalyst to push up the stock price in a few days' time. Once that catalyst arrived the stock was spiked into the close of the market and during the night session where there's little volume. Come the new session, Goldman Sachs reiterated its conviction buy and $600 price target. General euphoria did the rest during the trading session.

There was just one thing missing here. The dump. Right into the euphoria and relentlessly, the shares that were previously accumulated were sold. This is perhaps how you sometimes go an entire quarter without a single losing day.

"Bear in mind that in situations like these," Santos writes in the spirited commentary his post provoked, "it doesn't need to be GS taking the profits, these things can also be used by their customers."

Below: Santos' chart comparing last week's volumes and gaps to the action following Apple's Jan 24 earnings release.

Click to enlarge. Source: Paul Santos

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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