A Look at Apple AAPL’s Trend Intraday and Daily

Jan 14, 2009: 8:06 PM CST

I thought I’d do something a little unique tonight and describe Apple’s trend day down today and then show the daily chart structure.  With everyone now discussing Apple CEO Steve Job’s departure announcement today, I thought it might be nice to see the technical structure and explain how news events like this can instantly destroy the most perfect technical (analysis) balance.

First, the “Trend Day Down” Example on the 5-min chart:

Similarly to how I analyze trend days in the DIA 5-min chart, I thought I’d shake things up a bit and look at the Trend Day Wednesday’s price action gave us.

We began with a large (greater than $1.00) downside gap which was the first clue we might have a trend-day underway and price never really looked back from this point.

We developed a mini-rounded reversal pattern on a momentum divergence that took us up to the falling 50 EMA at noon to set-up an “Impulse Sell” trade – or resistance trade (notice the doji at resistance) which offered better risk/reward to the short-sell side.  Price went on to make new intraday lows at 2:00pm after pulling back one more time to give a quick sell-signal at 1:00pm.

Price formed a similar ’rounded reversal’ which only gave us a retracement that took us back to the falling 50 EMA, breaching it on an intra-bar basis (hopefully not snatching away your stop) and then price plunged to new lows before the close of the trading session…

Unfortunately for any Apple investors or bulls, Steve Jobs announced he will be stepping down as CEO until June 2009, a possibility many Apple investors feared (Jobs leaving), and reacted negatively each time there were rumors about his health – Tim Cook will take over the responsibility for now.  That brings us to the finely balanced daily structure which most likely will shatter forcibly to the downside tomorrow.

Now, Apple’s (AAPL) Daily Structure and Price Support… which is about to be shattered.

The price is finely balanced on key support about the $85 per share level, which could have been viewed as a classic buy signals off support for the potential for a reversal in price.  That may still happen, but we’ll have to deal with a potentially significant gap Thursday morning (as of this writing, Apple shares are trading after-hours at $79.30 per share, clearly breaking the support level).

We even had a multi-swing positive momentum divergence to help build the bullish case, though technically price was beneath all key daily moving averages and the averages themselves were in the most ‘bearish orientation possible,’ and price has not made a higher swing high in quite some time.

This also serves as an example why we can’t rely on any magic indicator, analysis, or formula.  Could anyone have seen Mr. Jobs breaking this news before-hand?  Can any indicator do so?  Absolutely not.  That’s why we trade with stops and with wise position sizing, such that one loss – or a series of losses – cannot take us out of the game.

Shorts will cheer the news, investors will lament it, but one thing is virtually for certain – price will move swiftly on the news and the almost certain path is to the downside.

Watch how this plays tomorrow and how it might affect (bring down) the broader stock indexes, particularly the NASDAQ.

Corey Rosenbloom
Afraid to Trade.com

2 Comments

2 Responses to “A Look at Apple AAPL’s Trend Intraday and Daily”

  1. NotAftraidofTrend Says:

    Perfect example of why individual investors should, for short-term, trade indexes and not individual stocks.

    As it is, most stocks are affected by the market. And there are enough uncertainties for the overall market. Who needs additional uncertainties relating to sectors, industries and stocks!

    Moreover, who has the time to research individual stocks, industries or sectors. We barely have enough time to get a sense of even the market!

    Stocks do make bigger moves than indexes, but we can make make up for that using leverage provided ES, YM etc..

    Liquidity is important for an orderly market of an instrument. Indexes provide that a lot better than individual stocks.

  2. Corey Rosenbloom Says:

    NotAfraid,

    I couldn’t have said it better myself! I made the transition from small-cap stocks to options to larger stocks to sector ETFs to Index ETFs and now index futures.

    The fact that I could lose thousands of dollars because one human being resigned a company just wan’t palatable for me – hence my move to sector ETFs. Of course, as you get better results, you’ll want to turn up the juice a bit with perhaps options or – in my case – futures and deeply analyzing one or two markets was far more rewarding to me than analyzing various companies.

    I’ve had an interesting journey but for now, the best tool for me – for this reason and many more – is index futures, particularly the Dow Mini.

    Thank you for sharing.