Apple Poised for a Near-Term Pop

I have five charts to show you of Apple (AAPL) from multiple time frames. This is pretty much my modus operandi when doing my technical analysis, to look at all the relevant time frames and see how they might influence one another. I also look at the sector charts if there’s an appropriate one, and the market charts. So, before we get into these AAPL charts, let me explain some of the things that guide the analysis.

The hierarchy of influence usually works like this; market over sector, sector over company. Then we have time frame to consider, where longer time frames usually exert more influence over shorter time frames, than vice versa. Keep in mind that these are guidelines, not rules. Now, one might argue that the action is all in the shorter time frame, which is true, but the momentum is with the longer time frame. So, monthly charts provide a longer-term outlook on the direction of a stock than weekly or daily charts. A concrete example would be that trend lines drawn on a monthly chart are less likely to be violated, than trend lines on a 30 minute chart.

Ok. So with AAPL we have a mixed bag, where some time frames indicate one thing and others indicate another. If all the time frames were in agreement with one another, then the analysis would be self evident. But in this case the shorter time frames are showing negative divergences, which indicates downward pressure in the very near term.

However, as we move to longer time frames, like the 60 minute, daily and even the weekly, we have positive divergences in place, which indicates that we’re due for a pop and run. How high is anyone’s guess. On the very long-term monthly charts, we are definitely in a strong down trend. And overall, the trend is still down. Here are the charts with annotations. Just click on them to expand.

Disclosure: No position.

Comments

[Ara:]

thanks for this but in this type of market, none of this even matters... Depending on the earnings reports and other news, that is what drives stocks, not charts right now, everything is irrational

Jan 26 07:45 AM

[Network Effect:]

@ Ara - I like your sarcasm. I agree, this technical analysis has gotten to the point where it is destroying the market. stocks appear to be perpetually detached from the underlying asset, and this is driving away the masses. i'm starting to hear this more and more from the "laymen" - it doesn't matter what you know about a company, just about a stock. this is very bad for the long term health of the stock market as a whole. no wonder no one is going public - if this keeps up for another 3-5 years, I bet you start seeing more companies go private and the drought of IPOs continues.

Jan 26 08:10 AM

[thompr:]

Zach,

AAPL is due for a run because the Apple fundamentals are kicking the butts of the pessimism that is baked into the share price. The event that most likely placed the potential positive indicators into your charts was the last earnings release, which was tremendous relative to the fears of Wall Street. The result was a big pop in the share price, which in turn juiced your indicators. Take that pop away, and you are still left with negativity.

For my own self, I identified an extra $80K and piled it into AAPL on earnings day (prior to close) and got the nice pop. Then I pulled out those extra shares and put the money back in where it had been. The charts never saw that one coming, but I used my common sense to bag a nice daily ROI.

So here is a little conclusion for you: it shouldn't take the charts to tell you that AAPL is due for a run. It should just take paying attention and using your common sense.

Charts Schmarts.

Thompson

Jan 26 09:40 AM

[Zach Bass:]

I appreciate all your insights on the importance of fundamentals over technical analysis, but I have to disagree. Fundamentals are good for identifying and differentiating solid companies from dogs, but they do little to give the investor an understanding of what truly drives this market and EVERY stock, including AAPL, and that's the supply-demand equation.

Only with technical analysis can you see the momentum, or change in momentum of a stock, based on the behavior of the mob.

Jan 26 10:42 AM