A Quick Chart Look at Apple AAPL

Mar 4, 2009: 11:27 AM CST

Apple Inc (AAPL) has been holding its own throughout the recent market downswing from February, showing relative strength to the S&P 500.  Let’s look at Apple’s Weekly Structure (using basic Elliott Wave) and also a key support level on its Daily Chart.

Apple (AAPL) Weekly:

Apple is likely coming off an ABC Corrective Three-Wave phase into support about the $80 level.  The final 5th wave seems “iffy” but we’ll have to watch its development closely.

There’s a lengthy positive momentum divergence that has set in since October, which could have bullish implications if price can stabilize at this level, and moreso if Apple can break above $100 per share (which would reverse the short-term trend to up).

However, at the moment, price is beneath all three key moving averages, which shows structural weakness.  Aggressive traders might decide to enter here (as a tight stop can be placed beneath $80 or $85) but more conservative traders probably want to wait until Apple shows strength and confirms potential support at these levels.

Apple (AAPL) Daily:

Dropping down to the Daily chart shows us what it’s like “Inside the Divergence” that has been building.  Price has formed a tight coil or rectangle between $85 and $105 (technically $80 and $110) which has accounted for the positive indicator divergence.

The obvious price points to watch short-term are the $100 level (which is round-number resistance and the confluence of the 20 and 200 moving averages on the weekly chart) and $85 (which is multi-tested support).

It would appear that price could be more likely to challenge and break above $100, though if price broke beneath $85… and especially $80, then any bullish argument would come quickly into doubt.  A break above $100 could lead to a price expansion move up to the $130 level or beyond… but it’s probably best to wait for confirmation before taking a position within a market in balance (or price consolidation) as it’s always uncertain in which direction the break will occur.

Corey Rosenbloom
Afraid to Trade.com

2 Comments

2 Responses to “A Quick Chart Look at Apple AAPL”

  1. Charles Upton Says:

    Corey, could it be that the recent trading range is some sort of elliot wave 4 sideways triangle formation? maybe a descending triangle? (like you, i am still learning the nuances of elliot)

    …these often end in a sharp thrust down into wave 5.

    what you have labeled wave 3 looks textbook, but wave 5(in your count) just doesn’t “look right”.

    charleS

  2. Corey Rosenbloom Says:

    Charles,

    You make an excellent point. I went back and forth when annotating this chart before making it public. That’s still absolutely a possibility, which is why one who decides to go long must honor a tight stop beneath support. It’s a superior risk/reward if the stock reverses up from here but there’s no guarantee it will do it.

    I’m seeing the positive momentum divergence and solid support which seems to add to the bullish case. Also, wave 4 as I’ve drawn it took the same amount of time – 3 weeks – to form as wave 2 so there’s proportion. Might not make sense to have wave 2 be 3 weeks and us still be in wave 4 which would be about 20 weeks. But you’re also right in that 5 doesn’t look appropriate. Maybe it truncated.

    But Elliott Wave is just one indicator to me – just like a trendline or an oscillator. It gives a signal and isn’t always right. It’s the risk reward and money management that ultimately matters.