Stock Chart of Apple
Apple's stock price topped peaked at $701.86 in September of 2012 and had since fallen some 25% since that time. The fundamental story? I really can't say because I do not have a seat in the boardroom. Anyone that say's they know better is a liar at best. I look at the charts and from what the charts say Apple is in a pennant formation. I know what you new readers and non believers are thinking asking in a slightly mocking fashion. “Gee Mr. Stock Chart Tea Leaf Reader, doesn't the chart tell you where the stock will trade in the coming weeks. The honest answer is frankly no. Stock charts are not crystal balls. They are a reliable measure of money following into and out of a particular stock and a visual tool to identify chart patterns which if the stock price behaves well triggers a buy signal at a specific price. If the stock breaks support it is a bearish sign and a signal to either A) short the stock or B) stay in cash and wait for a buying opportunity.
Make the call Desmond, Buy or Short Apple!
O.K. so you have applied the pressure and I'll be happy to answer. The mistake that most newbie technicians makes is that they follow intra day charts which unless you are a day trader is in my opinion frankly a waste of time. Some will follow daily charts which are good to use but only after you view the weekly chart to see how the stock has been trading in recent weeks. In the case of Apple is has traded been trading between $505 and $555 but don't let the $555 get you all excited. I don't think that Apple will see that level again for several months. Why? If you look at the December 31st Weekly Chart you will see a massive topping tail on the candlestick. What that tells you as that there are big sellers at $555 that sold into the post “Fiscal Cliff” euphoria which is bearish. Don't worry it gets worse because if you take a look at the past six weeks you will see that Apples has been unable to close above $530 which is stiff resistance. Should you go shorting Apple no, don't be a sucker. It is earnings season, and the manipulation games are about to begin. They'll probably hold it in it's current formation until earnings which are scheduled for release on January 23rd. My guess on how this will play out will be that they announce a beat on earnings and the stock spikes. The following morning as the stock is being bid up into the $530 to $555 range you'll see selling into that spike. If you feel like speculating you can either open up a spread using put and call options to profit from volatility or you can wait for the spike into earning, wait until 10:30 am EST and open a small short position with a stop just above the day's highs. Add to the position on weakness.
Do I buy Apple stock before earnings?
Are you nuts? No way do you buy Apple or any other stock into earnings. You have no idea what they'll announce. How many times have you heard them beat by a penny yet the stock gets' clobbered. If you buy any stock ahead of earnings without a hedge you frankly deserve the beating you'll get. Wait until the news is out and the shorts are squeezed, then we pounce.
When do I short Apple?
You short Apple on a close below $505 which marks recent lows. Why not short below $500? It's because everyone will be shorting on a close below $500. I am not saying open your entire position all at once but I believe that there is a very good risk to reward entry point below $505. Where do I think will fall to? Again, using the Weekly or Long Term chart of historical pricing and support levels I think Apple can correct all the way down to it's October 2011 low of $422.