Sunday, January 26, 2014

AAPL Apple Weekly Chart Sideways Channels

Activist investor Carl Icahn is buying up shares in Apple the last two days, adding to an existing position. Icahn always creates buoyancy in stocks since traders think companies will be split and sold off to unlock value, thus higher stock price, or in general believe the company is healthy since his lieutenants tell him to go long. Icahn likely has a whole room, or floor of a building, full of chartists. The bullishness and enthusiasm for Apple, however, is likely misplaced. Either the chartists told Icahn the truth and he ignored it, or the chartists are looking at a different chart than Keystone. Apple is big drama tomorrow since earnings hit after the closing bell at 4 PM EST.

Looking back, the red rising wedge in 2012 was a textbook top that Keystone called. If you remember, the bullishness for Apple was off the charts back then. Once 700 was violated the 1000 and higher price targets started to appear and then, collapse. The chart illustrates how dramatic the drops out of rising wedges can be; for AAPL it results in a drop from 705 to 380, -46%. The green falling wedge and positive divergence creates the move back up that was highlighted last year as it occurred. Over the last few months the idea was to wait for price to top out in the new red rising wedge, which it has for the most part.

With earnings on tap, a huge upside move has to be left on the table. However, if long the stock, any bounce up towards the 580 ceiling should be sold and considered a gift. Actually any pop off earnings above 550 should likely be sold. The MACD line is trying to squeeze out a bit more upside juice but overall, the chart is setting up weak. A downward channel is taking hold with lower lows and lower highs. Note the stochastics printing a lower low. This acts as a weight on price like a man trying to climb a ladder but someone is pulling on his foot. Eventually the climber gets tired and falls.

The 62% Fibonacci retracement of the big drop from 705 to 380 results in a resistance level at 560-565, adding street cred to the 560-580 area as a sturdy ceiling. Thus, the idea would be to short AAPL here forward. A pop on earnings would be a gift to short. The 580 ceiling should hold. A short position can likely be initiated before the earnings. (Remember all trades are highly speculative.) Projection is for price to move sideways to sideways lower moving forward through the 440-580 channel. Apple may line out through the sideways channel for the remainder of the year, or, lower under 400 as the year plays out. A drop under 530 likely leads to 480. It will be a circus tomorrow at 4 PM EST. Icahn is going to look silly when AAPL drifts lower this year. His chartists are now updating their resumes since heads will roll when the boss looks bad. Keystone does not have a position in AAPL currently. 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.

Note Added 8:37 AM on 1/28/14: AAPL reports earnings last evening, Monday evening, and beats on EPS, beats but barely on top line but most importantly, sells only 51 million iPhones when 58 million in sales were expected. In the AH's, AAPL collapsed -7%, losing about 39 bucks to 512.

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