Thursday, September 22, 2011

AAPL Watch

My email queue is a tribute to the fear-mongering that often marks market commentary:

"Boohah! Judging How Big This Crisis Will Get", says Friend Cramer.

"Fear Grips the Globe", say his colleagues at The Street.

When everyone around you is losing their head, the fun thing to do is to lose yours, too. But usually, it's best to take a deep breath and gain some perspective.

Take Apple Inc (AAPL), for example.

sym phase trend adx   200/50 40/10

Yes, the price gapped down 2.7% at the open. Yes, an upward push of more than $8 failed to sustain itself, and the price dropped back to near the open.

But the gap was only a dollar or so greater than the 10-day average true range, the amount the stock moves on average each day. The decline has brought the price only back down to where it was on Monday.

A Fibonacci retracement grid from the base of the summer's rise, at $310.50 on July 20, to the peak, $422.86 on Sept. 20, shows the retracement of the last few days is still short of the 23.6% Fibonacci retracement level. A healthy retracement reaches at the least the 38.2% level, which is around $380.

And many stocks are exhibiting the same pattern as AAPL's. Good company. Lots of fundamental strength. But it's not an outlier in today's move.

In so many ways, this is not yet a panic chart. Could it be? Absolutely yes. Absent a crystal ball and prophetic powers, the future of the market is always a huge unknown.

As a fact-based trader, I base my positions on what I know now, not on guesses or fears about the future.

In the case AAPL, the facts are:

The price has dropped back into a sideways range that began in early August, as it was with much of the market.

A decline below the range's low point -- $353 -- would suggest that indeed a downtrend was in force. (As is it an accident that $353 is at the 61.8% Fibonacci retracement?)

A decisive rise above top of the range -- $405 -- would suggest that the uptrend is back.


  • phase: 20-day price channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
  • trend: Price direction, green for higher highs and higher lows, red for lower highs and lower lows, yellow for neither.
  • adx: Average directional index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta for sunset on the horizon and brown for the earth.)
  • 200/50: The moving average cross, green for the 50-day ma above the 200, red for below and yellow for closely aligned.
  • 40/10: The moving average cross, green for the 10-day ma above the 40, red for below and yellow for closely aligned.

About my trading methods

Read a detailed explanation of my analysis method, including trading rules.


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

The trader’s greatest sin is inaction. Sleeper, awake! Seize the Nietzchean moment. Roll out of bed and trade.

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