Apple (NASDAQ:AAPL) continues to shape the tape somewhat each day, and plenty of investors with a cost-basis above $650 have taken the hope-and-pray strategy for the stock to go higher.
For a little more clarity, let’s look at a few charts.
When it comes to Apple, the first thing I have been pointing to in recent months is the longer-term trend. The below chart, which looks back to 2009, nicely displays the uptrend that in 2012 went from being nice and steady to vertical. As such, the correction we have seen since the September 2012 top is nothing more spectacular than a mean-reversion move back to a longer-term uptrending channel.
That’s not to say AAPL can’t fall below the uptrend, but for now, my focus remains around this channel.
Now, let’s take a closer look at the charts, focusing on the correction/downtrend that started in mid-September 2012.
The first swing lower from September to the November lows managed to retrace almost 50% in early December before running into resistance. A drop below the November lows would target an area near $460.
Even closer-up, the swing from the early December highs to the mid-December lows retraced close to 61.8% — an important Fibonacci resistance area — by Jan. 2, 2013. This swing now targets an area just near $480, which also happens to coincide with the bottom of the longer-term uptrending channel discussed above.
So, I currently see two active swings in the chart of AAPL, both of which point to targets below the $500 mark.
The first target, conservatively near $480, is roughly 8% lower from Monday’s closing price of the stock, and the second target (closer to $460) is about 12% away. These price levels will remain active targets until AAPL develops a meaningful reversal signal.
In terms of the momentum oscillators, looking at the Stochastic or Relative Strength Index, Apple stock should have plenty of downside momentum left to drop below the $500 mark.