Apollo Group Launches

Jan 10, 2008: 10:29 PM CST

Apollo Group (APOL) has shown amazing relative strength in the current market environment, and has actually ‘launched’ to new highs not seen since 2005.

Having nothing to do with space exploration, the Apollo Group is actually an educational ‘umbrella’ company, with subsidiaries such as the University of Phoenix and Insight Schools. It provides education at all levels. There are other sites to learn more about the fundamentals of the Apollo Group, however.

Let’s set this picture up graphically, starting with the monthly chart:

Notice the major run-up during the bear market of 2000 – 2003. The stock increased from $10 to $95 just as 2004 started before falling back to earth.

Potentially, one could assume that during bear markets, people rush back in droves to further their education. Just a theory.

It appears that round two is underway, and a potential retest within the next few years of prior highs is not unconceivable.

I have noted a momentum divergence from 2006 to 2007 which potentially forecast the reversal and upcoming strength by the bulls.

The weekly chart of APOL is a near perfect study in Bull Flags and Moving Average support:

Each “flag” is highlighted in green, while each pullback to the 20 period rising moving average received a blue arrow.

Volume confirmed each upside breakout. We have a strong and dominant current uptrend in place.

Let’s also take a chance to look at the strong momentum divergence during 2006:

Notice the prolonged momentum divergence which you can almost “feel” developing as subsequent price swing lows became shallower. An impending upturn was increasingly likely.

However, just like the market loves to do, there was a final downthrust in price which shook out all sellers quite violently before beginning the eventual and expected direction up. It was a sudden, unexpected, and bloody downswing in late 2006.

Once all the sellers were washed away, price could comfortably begin its new uptrend which continues to this day.

Speaking of daily:

The daily chart appears to be completing a “breakway gap” that could lead to new price highs. The intraday price rejection of Thursday was quite bearish, but may prove to be a small blip in an otherwise powerful up-trending stock.

Nevertheless, it might behoove you to keep an eye on this stock… before it flies away from you.

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