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October 1, 2012 / redman59

Similarities in Apple ($AAPL) Before It Last Corrected

There is no doubt that AAPL still remains a talked about stock especially with those cheering for the outperformance of GOOG and the inability for AAPL to gain ground recently.  Looking at the last time that AAPL corrected, I am seeing some similarities to which I find intriguing.  Here are some notes about the last time that AAPL saw a significant correction:

  1. High on 4/16/2012 to low on 5/18/2012 compromising of 29 trading days
  2. High of 644.00 to low of 522.18 (-121.82 pts, -18.9%)

Below are side-by-side comparisons of the last time we saw this correction (on left) and to what we are seeing now (on right).  Click the chart to enlarge for better view and notes.

The following can be noted from top to bottom on the charts, the highlighted boxes for price and Relative Strength are of the same days:

  • Once we undercut the 10 EMA, we had a big up day that tested/came close to testing the downtrending 10 EMA, closing below both instances
  • Relative Strength (using the Russell 3000) undercut its RS Average and the big up day created a near test of the RS average but did not close above
  • Both charts are seeing an increase of volume near the top with days having above average volume (using 50 SMA), indicative of indecision and topping patterns

So with these notes and just overall observation of the chart it looks like we are seeing some similar price, volume, and indicator action.  I do want to say that I am not calling the top in AAPL.  I just noticed some similarities and things like this should be taken into consideration if you are looking to jump in AAPL.  Even though AAPL is one of the most manipulated stocks we also have to keep in mind that human behavior does not change and this pattern could definitely repeat itself.

Below is a chart with two buy targets:

  1. 625, near the current 100 EMA (which I consider a long-term buy the dip area in momentum stocks)
  2. 571, marking the same percentage correction as last time, comes in near current 200 SMA, for me it’s a no questions asked buy no matter what area

Overall it’s almost hard to think that AAPL would see the 200 SMA but nobody can predict the future, but it would be hard to believe that buyers would not show up some where around there.  Again, not calling the top in AAPL but I’m hoping to see some further selling at least to the 100 EMA so I can get in this for some longer term trades or at least put on a covered call strategy using LEAPS.  Also keep in mind that AAPL has earnings October 25, 2012 after hours.  This could create a scenario to where we could easily see the test of the 100 EMA play out if AAPL has a negative reaction.

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