AAPL Apple Weekly Chart from 2009 Bottom to Present Upward-Sloping Channel Falling Wedge M Top Head and Shoulders (H&S) Pattern Earnings 1/23/13

AAPL was down 4% last week and the oddest thing is that the broad indexes were up one percent.  Apple makes up about 20% of the Nasdaq and about 7% of the S&P 500 (SPX). Many mixed signals are occurring in the markets. Perhaps the money running from Apple is simply moving into riskier small cap stocks, which is causing much of the short-covering rallies and strong movement higher in the small caps to begin the year. Seasonality-wise, the small caps do well this time of year. Thus, the broad indexes remain buoyant despite the AAPL selling but it is far more likely that if Apple weakens further, so will the markets.

The five-year blue trend lines failed in the late summer off the double M top forecasting big trouble ahead. The upward-sloping channel middle rail failed in the October selloff. Price is now at the lower red trend line.  The 20-week MA is about to fall thru the 50-week MA which signals long term bearishness ahead. As with all crosses, however, many times price will bounce as the negative cross occurs. The green falling wedge is in play now as explained in the daily chart during the week. Simply type 'AAPL' in the search box above to bring up the recent Apple charts for further study.  The indicators are lining up with positive divergence wanting to see a bounce, but the MACD line wants a lower low and the RSI may turn more negative in coming days.

Price may bounce up to 520 but the upside does not appear worth chasing. Price will launch out of the falling wedge at some point forward.  Note the uber strong support at 430-ish, a test of this important level cannot be ruled out for the short term ahead. The launch zone from the falling wedge is 430-490, however a tighter area of 465-485 may prove to be ground zero. A lot depends on earnings which hit on Wednesday after the close. Apple earnings will greatly impact markets this week.  If earnings disappoint  that would line up with the bottom in the 430-490 area and provide an opportunity to play the bounce up out of the falling wedge. If the earnings beat, then it is off to the races, the wedge would have already served its purpose and price will continue higher. Looks like patience may be best to receive the lower print (to play the long side) even if it means waiting until Thursday, after earnings, to see if a disappointing number does occur.

The pink H&S pattern is of interest and already in play since the 500 level was violated and a right shoulder was placed at 580-ish.  If the falling wedge bounce occurs, price may come up for another right shoulder at 580-ish, then roll over again. The lower target for the H&S is 295 (705 head minus 500 neck line is 205 difference; 500-205 = 295), perhaps as the year moves along. For now, watch the falling wedge and positive divergence setting up, and of course the earnings on Wednesday. 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.