by Serge Berger | April 5, 2013 9:27 am
It’s now been nine trading sessions ago since I last mused about the technical picture[1] of Apple (NASDAQ:AAPL[2]). On March 25, I said the stock looked to have enough juice left for another marginal move higher, while the $450 area would be my line in the sand to potentially consider the short side of the stock again.
A glance at the six-month chart — and hence the major downswing in Apple — reminds us of the initial breakout test past the downtrend that AAPL staged in early March. While for the quicker hitters among us there was a long-side trade to be had, the setup for those with intermediate time frames has so far been a scratch at best. As such, it is time to re-evaluate the charts and sniff at a new potential setup.
In mid-March, AAPL managed to sneak above its 50-day simple moving average (yellow line) for exactly two days before gravity kicked back in and pulled it lower. This simple moving average still holds as resistance until proven otherwise.
[3]
As of Thursday’s close, Apple was well on its way to retest the early March lows near $419, which given the downside velocity and steepness of the slope, now has a good chance of being pierced through quickly. In other words, AAPL is hanging by a thread here as the $425-$419 area serves as major intermediate-term support.
At this stage, it is handy to look at simple retracements to pinpoint potential downside targets for the stock should the March lows give in a hurry.
[4]
If we measure the swing from the late January highs down to the March lows, note that by late March, the move was retraced by 50% before finding resistance. A 25% extension of said move would get us a target well below the $400 mark, namely closer to $390, although better lateral support comes in at $380.
Serge Berger is the head trader and investment strategist for The Steady Trader[5]. Sign up for his free weekly newsletter here[6].
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