Since my last update on Apple (NASDAQ:AAPL) last week, the stock has done more or less nothing. But even this lack of movement can tell us something.
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.
