I Spy … The Most Insightful AAPL Chart

Apple is the most important stock on planet earth.

It’s the biggest component of the S&P 500 (NYSEArca: SPY) and Nasdaq (Nasdaq: QQQ). As of March 18, it will also be part of the Dow Jones, where it will rank as #6 of 30 (at least initially). Not bad for a “newcomer.”

The ebbs and flows of AAPL will affect almost every corner of the stock market universe.

When AAPL coughs, the market will get a cold. What are the odds of AAPL catching a cough?

Historical Dow Jones Curse

Historical data shows that inclusion into the prestigious Dow 30 club is more of a blessing than a course, at least short-term. 9 of the 15 components added since 1999 lost on average 6.3% within the first month.

Technical Blessing?

I invite you to inspect the AAPL chart with me.

Support: Green lines at 120 – 122.

Resistance: The chart only shows one red line, but there are actually two red lines (one going back almost 20 years) converging around 140. Prior to that, there’s black trend channel resistance around 132.

Interpretation: Although the brief spike above the black trend channel (accompanied by a bearish RSI divergence) could be a throw over top, I personally favor higher prices as long as AAPL stays above 120.

This is in conflict with the ‘Dow curse,’ but in harmony with AAPL seasonality (view AAPL seasonality chart here).

Sentiment may also support further AAPL gains, as the iWatch failed to garner much excitement (it’s easier to beat low expectations).

  • Bloomberg: Apple watch is a really poor product
  • MarketWatch: 3 reasons to think twice before buying Apple watch

Summary: Support at 120 – 122 deserves being watched closely. I favor further up side as long as support holds. However, a close below 120 cautions of a deeper correction.

Simon Maierhofer is the publisher of the Profit Radar ReportThe Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013 and 17.59% in 2014.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Up 28% – Will Apple’s Resurgence Last?

Based on chart analysis, AAPL has more room to rally and seasonality allows for higher prices. However, there is one fly in the ointment that could send the stock straight back down. Regardless, here’s support that should be watched for now.

Apple (Nasdaq: AAPL) just staged the biggest rally since September’s all-time high – shares are up 28% from the June 28 low.

Will the rally stick around or deflate?

AAPL Seasonality

The other day we looked at the first ever readily available AAPL seasonality chart. It pegged the September 2012 all-time high and the onset of this rally – View AAPL seasonality chart here.

AAPL seasonality projects a minor lull and another spike before a seasonal peak in September.

AAPL Technical Analysis

The AAPL chart shows a technical breakout. This breakout happened late July (green circle) when prices busted above resistance.

Unlike prior times (red circles), AAPL wasn’t rebuffed by resistance but defied resistance.

The July 29 Profit Radar Report commented on this technical breakout and suggested that: “Investors may leg into AAPL with a stop-loss just below 447.”

This was a low-risk trade set up, as support was only a couple points below the trading price, limiting risk to a mere 0.5%.

Apple’s big Tuesday spike hoisted price above another trend line, which will now serve as support.

Next resistance is around 520. As long as trade remains above support we’ll assume AAPL will get there. There are higher potential targets thereafter.

Multibillion-Dollar Tweet

The biggest concern about Tuesday’s mini Apple meltup is that it may have been caused by a news event or multibillion-dollar tweet. Via Twitter, Carl Icahn announced that he acquired a large position in AAPL.

This tweet increased Apple’s market cap by $12.5 billion. If the rally is only caused by a tweet, it could be quickly retraced. In my experience though, such external events (tweet) usually coincide with technical strength and are used to explain moves rather than causing a move.

AAPL Effect on Market

AAPL’s resurgence is happening as the overall market is showing weakness and sporting some bearish divergences.

AAPL is the biggest component of the S&P 500, Nasdaq (Nasdaq: ^IXIC), Nasdaq QQQ ETF (Nasdaq: QQQ) and Technology Select Sector SPDR (NYSEArca: XLK).

Although AAPL and broad market indexes were de-coupled from October 2012 – May 2013, Apple is still barometer for the broad market.

Despite some cracks, the major US indexes will have a hard time declining without the participation of AAPL.

As long as the S&P 500 remains above key support, there’s little to worry anyway.

Simon Maierhofer is the publisher of the Profit Radar Report.

Follow him on Twitter @ iSPYETF

 

From Boom to Bust – Is Apple All Downhill from Here?

Apple has gone from the first ever 1-trillion dollar baby to stock investors can’t sell fast enough. Is Apple’s sell off overdone? Here’s one key point and a piece of technical analysis that may well hold the answer.

Downhill, up the creek, or to new highs? What’s next for Apple?

The iPad is selling like hotcakes, the iPad Mini tops many holiday wish lists, and Apple is projected to sell 53 million iPhones this quarter, a 40+% increase from Apple’s previous one-quarter record of 37 million.

Considering those numbers, is Apple’s recent 28% drop overdone?

That’s the wrong question. A better question is whether Apple’s run to its $705 all-time high was simply overdone?

The Disconnect between Sales an AAPL Shares

A September 18 article here on iSPYETF addressed an obvious but ignored math flaw in AAPL shares three days before the stocks all-time high. Here’s what I mean:

On September 13, Apple unveiled the new iPhone.

On September 17, Apple sent out an e-mail announcing that iPhone 5 pre-orders topped two million.

From September 13 – 17, AAPL soared 3.5%. Did this move make sense? Let’s calculate:

The profit margin on the iPhone is about 58% (according to a document obtained by Reuters). The average price is $299. The profit on 2 million iPhones sold at $299 is $347 million.

The 3.5% September 13 – 17 rally increased Apple’s market cap by some $24 billion.

Did anything material change in Apple’s fundamentals to validate this rally? No. The same article warned that Apple is due for a reality check, which will drag down the Nasdaq and technology sector.

So is Apple’s decline overdone?

Flawed Math is No Indicator

We surely won’t get the answer from Apple’s (holiday) sales. The math didn’t work on the up side and it won’t work on the down side.

Three factors that likely contributed to the most recent leg down are:

1) Profit taking before a seemingly inevitable tax increase.
2) The psychological effect of the death cross (although it’s not always as bearish as it sounds).
3) The increase of margin requirements by some clearing firms.

The most important factor is simply that the higher a stock rallies, the further it can fall. Apple’s run from below 20 in 2004 to above 700 in 2012 was just “too much of a good thing.”

Despite the set back, AAPL is still up 33% YTD and Apple’s market cap still $100 billion bigger than its closest market cap competitor.

Short-term Technical Outlook

Technical analysis of Apple and the AAPL chart warned of a top above 700 and a bounce of the November 16 low at 506 (summary of my Apple analysis can be found here).

The current chart is somewhat inconclusive, but selling has been heavy (see chart) and it seems to me that Apple is heading for a new low, perhaps around 480 – 490. Nevertheless, the down side seems limited and a new low unconfirmed by a new RSI low would create a bullish divergence and possibly prove as a springboard for a more sustainable rally into Q1 2013 (even without new low AAPL is likely to rally in Q1 2013).

 
Simon Maierhofer shares his market analysis and points out high probability, low risk buy/sell recommendations via the Profit Radar Report. Click here for a free trial to Simon’s Profit Radar Report.