The Support Shelf and Trading Range to Watch in AAPL

Jul 13, 2010: 12:46 PM CST

Apple Inc (AAPL) frequently receives a great deal of media attention on their recent iPhone and iPad gadgets.

However, their stock has been stagnating in a trading range between$240 and $270 since May.

There is a critical support area – particularly from the weekly chart – that traders should be keenly aware of, so let’s see these levels and the bigger picture with Apple’s stock.

First, the daily trading range:

As the daily chart shows, Apple has a clear overhead resistance boundary at the $265 per share level, despite the ‘bull trap’ spiking up to $275.  .

Thus, Apple bulls have their alerts set at the $265 level as the upside breakout level to punch through.

The lower boundary actually is rising, as seen in the ascending trendline, which will make more sense as you view the weekly chart.

Volume has trailed lower during the consolidation phase, but given that it’s summer and stocks in general exhibit lower participation/volume during a trading range, this is nothing to be concerned with yet.

Remember that in a trading range, moving averages matter less, so look to the trendlines as more important indicators.

Now, let’s see why the lower trendline is rising and what makes that very important going forward:

Surprise!  The stock is supporting exactly as expected on the rising 20 week EMA within the context of a rising uptrend.

As long as that continues to happen, Apple bulls can rest easily, expecting higher prices yet to come.

However, one should not have blinders or bias with any stock, so it’s worthwhile to highlight the negative momentum divergence that undercut the recent high as seen above.

That’s bearish.  However, divergences are just conditions – price (and supply/demand) is key.

So, the structure and trend remains up, but traders/investors need to focus very closely going forward on the rising 20 EMA, currently situated at $244 per share.

If sellers push price under $240, we would expect a deeper retracement, perhaps all the way back to the rising 50 week EMA at $220, which would break price downwards from the daily trading range as seen above.

Those are your parameters to watch going forward:  A break under $240 is a very bearish situation, though anything less than that keeps price in the prevailing uptrend, and a break above $265 then to new highs beyond $275 ($280 to be conservative) gives investors once again the ‘all clear’ in this stock.

Until then, watch the developing structure very closely.

Corey Rosenbloom, CMT
Afraid to

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  1. Update on the Pesky Trading Range in Apple AAPL | Afraid to Blog Says:

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