Wednesday, January 23, 2013

AAPL: A chart talk

Apple Inc. (AAPL) has been on a downslide since touching an all-time high of $705.07 on Sept. 21 of last year. The low so far in the decline has been $483.38 on Jan. 15.

The media writing on AAPL, predictably, has been "OMG How low can it go Sell Sell Sell" seasoned with the contrarian "I'm smart because I'm loading up cheap".

As always, the problem is how low is low and how cheap is cheap. These are relative terms, and the Apple reporting is treating them as absolutes.

Here's a quick AAPL chart talk:

The stock is trading in a 20-day price channel ranging from $483.38 to $555. It moved out of price channel bear phase (while remaining in a downtrend) on Dec. 31, and gave a fresh bear signal on Jan 14.

As of Wednesday, a move above $531.89 would return AAPL to neutrality, and a break above $555 would be a bull signal.

I would open a bull position on AAPL if it were to break above $555 (confirmed by staying above that level the next day). I would use my usual short-term trading rules.

However, for AAPL to return to an uptrend, it would need to not only set a high above $555, but then drop for a reversal above $483.38, and then continue on by setting a new higher high.

Those three data points would put AAPL into an uptrend on the chart, according to the classic definition, and would allow me under my longer-term rules to open up a bullish diagonal spread or some other cash-generating structure that lasts for several months.

I find the reporting on AAPL to be laughable. The chart is extremely clear. Apple is within 8.1% of becoming a candidate for short-term bullish speculation. That's about three days' move, on average.

But the stock has some work to do before it becomes a candidate for a longer-term position.


My trading rules can be read here.  A discussion of recent modifications to my trading methods, which haven't yet been incorporated in the original write-up, can be found here.

And the classic Turtle Trading rules on which my rules are based can be read here.

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.

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