We’re seeing a bit of price pattern repetition in Apple’ s (AAPL) stock chart so let’s take a quick look at the recent and current retracements to see what levels to watch at the moment.
First, here’s the broader Weekly Chart picture of the ongoing trend:
After a stellar rally and breakout above the $425 resistance level in early 2012, Apple impulsed powerfully to the $625 region before retracing in a stable movement back to the rising 20 week EMA ($525 level) for a support/flag play.
Not surprisingly, Volume and Momentum clearly increased during the rally which suggested the broader trend was strong and that higher highs were likely to come in the future.
After supporting off the $525 level, price continued the trend which resulted in another powerful – but not AS powerful – rally to the recent $700 level ahead of the current retracement move currently in motion.
That’s where we stand at the moment and it’s what we’re assessing – how far will this retracement go and what levels are important to watch along the way?
Another question would be whether history repeats with a similar or different outcome as the prior retracement.
Let’s zoom in to the Daily Chart for a clearer picture of the recent peaks in price:
With all the information, lets start first on the highlighted yellow and red levels.
The yellow levels show visual negative divergences in both volume and momentum (3/10 custom MACD Oscillator) into the two recent trend peaks in the broader rally.
The April to May retracement took price back to the 20 week EMA ($525 then) on a roughly $120 (17.5%) steep retracement that resembeled a potential trend reversal on the daily chart.
The main idea here is that the chart pattern looked very bearish on the Daily Chart yet was just a stable retracement to support on the weekly chart.
What’s important now?
We’re watching closely to see if history repeats now… or else if price continues sharply lower to break the weekly moving average reference level near $625.
The immediate Daily Chart levels to watch will be $640 (the April visual swing high) then $625 (the rising 20 week EMA) and then finally $600 (’round number’ reference).
The most important level is likely $625 which also reflects the July swing highs as well.
From a classic sense, if this retracement carries beneath $625, it would be a danger/warning sign for Apple bulls/buyers and if the current retracement also breaks under $600, it would suggest the next target would move price to the rising 200d SMA near $580.
These levels would be initial targets for Apple bears to play for just as they would be potential levels for buyers to put on a trade with tight stops.
Either way, these will be focal points on the price charts during this retracement phase – the key will be assessing whether history repeats with another stable retracement to a logical support level or whether this sell-off will lead to a sharper, deeper movement lower.
This will also be a lesson to monitor in coordinating Daily and Weekly Chart levels together in real time.
Corey Rosenbloom, CMT
Afraid to Trade.com
Follow Corey on Twitter: http://twitter.com/afraidtotrade
Corey’s new book The Complete Trading Course (Wiley Finance) is now available!