Apple: Heading For Breakout Or Breakdown?

| About: Apple Inc. (AAPL)

Last week, Apple, Inc. (AAPL) seems to have wowed the public with its announcements and showing at the World Wide Developers Conference. In fact, one headline read "WWDC 2012: Apple Had a Pretty Amazing Day." The author noted the overwhelming new products that Apple presented, including MacBook Pro, iOS 6, and many other peripherals and updates. In fact, all in all, it seemed like quite a positive day for Apple.

But if we took a look at the stock price, on the very day of all the "fundamental" positives, Apple stock declined 3%. Does that leave you scratching your head or will you simply attempt to find some "reason" that will make you feel better about why the stock declined? In truth, the day before, I published an article on Apple calling for "a pullback [to] begin shortly." Furthermore, I even provided the target for the pullback when I wrote that "ideally, Apple should only decline to the 560-565 region."

The very next day after the decline began, Apple bottomed at 566, slightly above our target region. Yet, I did not know the news that was going to occur. So, how is it possible that this could happen directly after an event that was obviously reported as quite positive for Apple? Could it be that news does not necessarily drive the stock price?

In truth, it is always sentiment that moves markets and stocks, and not news. News will always be interpreted based upon the prevailing sentiment in the market, and this week was truly the perfect example of this phenomena. What would normally be viewed as a positive day for Apple was interpreted by a negatively driven sentiment to be a negative event for Apple.

This is exactly why I use Elliott Wave in my analysis of the markets. In theory, it understands that public sentiment and mass psychology move in 5 waves within a primary trend, and 3 waves in a counter-trend. Once a 5 wave move in public sentiment is completed, then it is time for the subconscious sentiment of the public to shift in the opposite direction, which is simply a natural cause of events in the human psyche, and not the operative effect from some form of "news."

This mass form of progression and regression seems to be hard wired deep within the psyche of all living creatures, which is the driving mechanism behind what we have come to know today as the "herding principle."

So, then, where does it leave us with regard to Apple stock?

A strong move over 579 would be the initial indication that Apple has begun a strong break out to the upside. In fact, once it breaks over 589, it would be targeting the 606 level, or even as high as the 615 level before another pullback / consolidation, on its way to the 621-631 region.

However, Apple is not completely out of the woods just yet. If Apple is not able to breakout over the 579 level rather quickly, there is a pattern that has developed that can take Apple down one more time to target the 555/556 region. If this does occur, then as long as 555 holds as support, Apple can still be viewed from a bullish perspective. But if it does not, and then breaks down below the 548.50 level, Apple can decline quite deep and rapidly, as discussed in last week's update.

So, clearly, this upcoming week is very important for Apple's bullish stance. In fact, within the first day or two of the week we really need to see Apple break out over 579 to strongly confirm the bullish case or else it will decline once again.

Disclosure: I am long [[Apple ]].