This is it … for all the Apples (and I’m not over-exaggerating). Let’s take a look:
Apple broke its descending downtrend resistance back in mid-March, but bulls forgot to make the important higher high (which is crucial for a bottom to occur). As you can see from the chart above, Apple’s strength ran out of steam shortly after. Sellers then took control and forced it back towards the pivotal $419 support, where buyers tried to muster another rally (the rally that followed was very weak). After consolidating around $419 for over a week, it broke its support on large volume, where more tactical sellers jumped onto the bear bandwagon, pushing the stock lower very quickly.
Apple eventually found support around its 50% Fibonacci 2009 low-2012 high retracement (it also filled a December 2011 gap). Since its bottom, Apple has staged an impressive rally, where volume looks healthy. It’s weekly MACD (a lagging indicator) says buy, but the weekly RSI isn’t convinced just yet. During most of Apple’s uptrend, its RSI remained above 50 (minus a couple of brief instances), which was a positive signal. But when the stock reversed and broke its multi-year uptrend, the RSI pattern switched (and has remained below 50 ever since). Now that’s being tested again … question is, will it muster enough strength to breakout out? That depends on its 38.2% Fibonacci 2009-2012 retracement. Apple has visited this level before (in March 2013) and failed. Will the second attempt succeed?
Coincidentally, the $460 area contains another Fibonacci level, this time its 2012 high-2013 low 23.6% Fibonacci retracement (notice the repeating theme?). The one problem with its daily chart is the RSI is getting extremely close to overbought conditions. Let’s not blow this out of proportion though. The RSI is an important indicator, but it can stay overbought for a period of time (while the stock keeps going higher). Just because Apple’s RSI is nearing overbought, doesn’t mean it can’t push above resistance.
The ball is entirely in the bulls court now. They brought us up here, but sadly not for the right reasons. Are we really that overexcited that Apple is buying back shares and increasing their dividend? It’s such a Microsoft move (the loser of the group). I prefer growth and increasing market share over rewarding whining shareholders. But that’s just one man’s opinion. Putting the fundamentals aside, Apple needs to make a move here and finally end this downtrend. Will it happen? I’ve learned to be cautiously optimistic and hedge when it comes to trading this stock. It’s a ball-buster, don’t get sucked in. Patience is a virtue. Wait for price and volume to confirm, then add on a pullback. Hope this helped.
Questions? Comments? Leave me a reply.