Apple Holds its Own

October 12, 2008

Apple Inc (AAPL) showed relative strength last week while the market declined so sharply.  I thought I’d show this speck of positive news in the sea of negative - let’s look at Apple’s daily and weekly chart.

Apple (AAPL) Daily:

While it doesn’t look like there’s anything positive to discuss on this chart, look at the top-right part of the chart:  Apple increased over $8.00 on Friday, marking a 9% daily increase over Thursday’s close.  The weekly gain (shown below) is worth attention, as Apple lost ‘only’ 0.26% while the broader market lost roughly 20% in a week.  That is a strong showing in relative strength, particularly on Friday’s price action.

Is there reason to buy Apple here?  That’s up to you and your risk-tolerance/trading strategy.  The price (chart) structure shows the following:

Momentum making a new (significant) price low.
The Moving Averages are in the most bearish orientation possible
Price has made a large volatility price swing from $180 to $90, losing half its value in roughly 2 months
Price appears to be ‘hooking up’ to form a countertrend rally (retracement) back up currently

If price indeed is to undergo a countertrend retracement, the first target would be the $115 level at the declining 20 day EMA.  After this, we’ll need to consider Fibonacci retracements for possible targets.

Let’s gather some insight from the Weekly chart now.

Apple (AAPL) Weekly:

Price is challenging the 200 week moving average, which could also make the case for a support bounce up.  If anything, it would appear that the risk of being short Apple has significantly increased now.

Still, trade extremely cautiously no matter what you strategy is, and continue to make capital preservation your #1 goal.  The environment is currently far more difficult than it has been even in the recent past.

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