Wednesday, December 4, 2013

AAPL Apple Daily Chart Upward-Sloping Channel Overbot Negative Divergence Upper Band Violation

Apple is receiving a lot of momo love the last few days. The chart is an excellent example of the power of the tight standard deviation band squeezes (pink ovals). Tight bands do not predict price direction, only that a wildly strong move will occur one way or the other. In September the squeeze was down, starting 2 weeks ago, the squeeze was up. Note the drop in price occurring exactly when the golden cross occurred (gold circle) which is often the case, but, as the weeks move along, price does print higher highs in honor of the golden cross. The band squeeze move down in September was a 63 handle drop. Applying the same fractal move, even though the price move is up rather than down, would result in an upside target of 574 (511+63), at the top blue rail of the channel. Note how price is printing above the upper band so a move back to the middle band is needed, at a minimum, which is the 20-day MA at 528, and rising, and a move to the lower band, at 499, and rising, is also in play.

The weekly chart shows some upside juice still available so AAPL should top in the weeks ahead, say within 2 to 4 weeks. Thus, there is no rush to short as yet, and the long side momo will continue to create a stronger emphasis for the upside. The red lines above show negative divergence in place across all indicators as well as overbot RSI and stochastics, all wanting to see lower prices. The MACD line and money flow want to squeeze some more upside juice out for the next day or two but the expectation would be a short pull back. The weekly chart would then reassert itself and send price higher again so a jog move forward is likely, with price floating up into the 570-590 range, then roll over. There is no desire to own AAPL long since the upside appears limited. You may squeeze out 20 or more bucks but if the broad indexes roll over in force, chasing the limited upside would not appear prudent.

A potential trade would be to initiate a short in Apple at 575. Then 580. A gap is at 580-590 so the short could be increased at 590. If AAPL continues higher it will want to see 620+ but at this time this move is not expected. Projection is for Apple to pull back in the coming days but it will then print higher highs again setting up a nice short opportunity from 570-590 (brown square) within the next month. The expectation would be that AAPL tags the 20-day MA at 530-540 over the next month. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.

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