As the Apple (NASDAQ:AAPL) earnings parade has come and gone, it is time to stop focusing on the charts that were and hone in on the charts that are — and what analysts think will be.
Following the company’s earnings announcement Tuesday, the analysis revisionists — also known as the sell-side analyst community — was busy taking their price targets down en masse. A select few analysts, much to many traders’ amusement, took their target prices down some 200 or more points after the fact.
For my part, however, the charts will tell us more than enough to continually sniff out opportune spots for swing trades in either direction. After all, if we can pick off 4% to 6% here and there in Apple, who needs to worry about analyst predictions of AAPL going to zero or infinity by next Tuesday?
The longer-term multiyear chart of Apple remains just as unattractive as it was a couple of weeks ago. As I discussed on April 9, eventually the stock had to dip below the $400 mark just to frighten those still too confident about their iPhone.
Should last week’s lows at $386 fail to hold, better lateral support sits around the $350-$360 mark, which is the area of ultimate support that I am watching.
The September 2012 downtrend remains firmly in place, yet Apple’s announcement of a massive stock buyback program should act as some sort of put below the market. At the same time, we would be wise to remember that there’s still a plethora of both institutional and private investors who bought this stock north of $600, and thus are likely antsy to cut their losses on any meaningful bounce.
Combine these two factors, and we have a stock that is potentially somewhat limited in both downside and upside for the time being. Though that shouldn’t keep swing traders from taking a few stabs here and there at juicy risk/reward points.
Closer up on the daily charts, we are seeing more defined entry points to the long side. With the exception of a couple of months, Apple has been a trend-follower’s dream stock … assuming one didn’t stay too stubbornly long last fall and switched to trending the stock lower.
The first downtrend line (lower red dotted line) briefly failed to hold as resistance in March. Thus the downtrend resistance line I am now focusing on is the higher red-dotted one on the chart below. At the same time, the 50-day simple moving average also acts as solid resistance since last September and more or less currently lines up with the upper red-dotted line.
Simply put, until the downtrend line and 50-day SMA are broken to the upside — currently around the $430 mark — risk/reward on the long side remains subdued.
Patience is a virtue.