On the simple daily chart looking back to the stock’s all-time highs of about $705 on Sept. 21, the downtrend is still firmly in place, marked by a straight line (blue) and reinforced by the 50-day simple moving average.
Also note that the stock has now fully retraced its entire 2012 vertical rally from January to September and thus now rests in a more neutral zone — with potentially less emotion-driven, slap-happy traders involved in the name.
Last week I mentioned that I would be looking for the following two points to initiate a potential long swing trade in Apple:
- major bullish reversal/seller-exhaustion candles; and
- positive divergence of momentum oscillators vs. price on the daily chart that would scare the bears enough to get out of the way and allow the stock to rise 10% to 20% without too much headwind.
Thus far neither has come to pass. But at least AAPL has stopped going lower, which of course is the first step toward a potential trend change to the upside.
The beauty of the charts lies in the very defined lines of resistance — if the stock is able to break through, it should quickly develop more upside momentum. The $435-$440 area, which was former support, has now repeatedly acted as resistance over the past three trading sessions. Thus a break past this level on a daily closing basis would put a more bullish tint on the daily charts above. A close above $440 could be bullish enough for the stock to jump 10% to 20% before heading into better resistance again.
Keep in mind that the faithful who bought the stock north of the $600 mark are salivating over any rally to let some of their supply back on the market — so the stock’s upside is limited for the medium term. But a quick near-term pop certainly looks possible from here.
At the time of publication, Berger had no positions in the securities mentioned.