Is Apple a buy or a sell?

December 12, 20126 Comments

On October 10th, I noted on a blog (https://www.valuetrend.ca/?p=1488) that I felt Apple might fall to under $600/share. At that time, the stock had fallen from its high of around $700, and looked to be retracing to its 2-year trendline. This weeks sector view presents the big trendline that I drew on the chart at that time. Interestingly, since that blog, AAPL has twice pulled right back to the trendline in a perfect test!

The question now is – does this present a buying opportunity, or should we fear a break of the trendline? From a  technical analysts point of view, AAPL is showing significant support at $520—see the lowest horizontal support line on the chart. The $520 level lies in conjunction with the big trendline drawn from early 2010. There is overhead technical resistance at just under $600 for the stock, and again at $620. Perhaps a short termed trading opportunity exists for traders willing to buy near $520 support, and sell as it approaches $600. A downside break through $520 would be very bearish for AAPL. I’d target a potential drop into the low $400’s if that happens.

My hesitation in buying the stock for a longer play revolves around the weakening moving averages, and the increased competition within the smartphone and tablet space that AAPL currently dominates. Not being a fundamentalist, I will place more emphasis on the moving averages at this time.  Recent actions on these indicators tell me that the near termed trend may be weakening. Witness the falling 50 day MA, and the “death cross” where it broke below its 200 day MA a week or so ago (daily chart below).

Also on the daily chart below, note the momentum indicators in the bottom panes.  RSI, which is a slower moving momentum indicator, is not signalling an oversold rally condition. RSI can provide meaningful mid-termed overbought or oversold signals for those who like trading over months rather than days or weeks. Stochastics looks to be on the verge of a buy signal. Stochastic “hook ups” can be  accurate short termed momentum indicators, meaning that they can signal a near termed rally, but not necessarily something that would appeal to longer termed traders.  

 

Overall, I am reasonably confident that a near termed rally could be seen for AAPL. I’ll need proof that the stock can maintain its trendline, and break through $600 before I get too bullish on the stock for the longer term. Meanwhile, keep a sharp eye on that $520 support level for a breach. That’s a game-changer, in my view.

6 Comments

  • Thank you for the analysis on Apple. I notice today that there was a Doji candlestick on both the SPX and the INDU dow index right at resistance lines and RSI negative divergence on the hourly charts on both. This would seem to indicate a correction in the next few days. This will be interesting to see if it takes Apple with it through the 520 dollar level you mentioned. After moving from 75 dollars in 2009 to over 700 dollars in 2012 I can’t see how there could me much more upside to this. But I guess anything can happen

    Reply
    • Thanks Dave
      Yeah, its a bit of a gamble here–some upside potential, but also could get ugly. I’m not playing it. Easier fish to fry out there in my view. Mind you, if it breaks $520 and hits low $400’s, I would start to look for an entry point. Thats to see though.

      Reply
  • KEITH,

    TUESDAY’S SHOWED THAT THE DJIA, NASDAQ AND S&P 500 PUSHED FIRMLY ABOVE 50-DAY MOVING AVERAGES. EACH BENCHMARK ALSO TESTED POINTS OF RESISTANCE MARKED BY THE START OF NOVEMBER HIGHS (S&P 500 AT 1434, JDIA AT 13,300) A HEAD-AND-SHOULDER BOTTOMING PATTERN COULD BE APPEARING FOR THE S&P500 WITH TARGET AT 1490 AND AS WELL FOR THE NASDAQ AT 3230. A BREAK ABOVE NOVEMBER’S HIGHS IS KEY… ALSO, THIS MORNING (DECEMBER 13) A POSSIBLE HEAD-AND-SHOULDER PATTERN ON THE US DOLLAR HAS SURFACED (SUPPORT AT 78.60). SOUNDS GREAT FOR THE EQUITY MARKET IF IT IS TRUE?

    Reply
    • Yes, I think most of us TA-types have noted the H&S pattern. I am bullish for the next 2 months or so. Nearterm, there are a few sentiment indicators signalling a short termed setback is possible – specifically odd lot trading is high right now, a signal that “dumb money” is re-entereing the market–sometimes this can lead to a pullback. But given the bigger background of the H&S formation, positive movement through MA’s and seasonal trends (especially Santa’s rally!) the market has more going for it than against it.
      BTW–All this can change around the do-or-die cliff deal, of course.

      Reply
    • Yup-it didnt even stop to bounce off of my $520 support level. AAPL is a very bearish looking stock right now. Look for mid-low $400’s.

      Reply

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