Wow! What an absolutely psychotic day for AAPL this morning so far. After gapping down more than $6 into the $520′s AAPL quickly flushed down to $518. From there though the stock rallied extremely hard and is above $545 at last glance. There is a ton of indecision on AAPL right now, a lot of people who bought near the $505.75 undoubtedly got flushed out today as it appeared AAPL would go back to $500. So should the technical backdrop be considered stronger or weaker for AAPL from here?
Here’s what we know:
- The mid point of AAPL’s $505.75-$594.59 recent low to high range is $550.17
- AAPL needed 10 days to go from $520′s to $590′s on the bounce and it needed 4 days to go back to $520′s from $590′s during this most recent fall
- AAPL 3 highest volume days (today is on pace to be a fourth) in the last 100 days have all traded at prices below $570 – $570 was a key low from July
- At $553 (as of 11:53 am est) AAPL is up over 6% from its low of day, far greater than the 4% intraday bounce it saw the day it hit $505.75
All of the above points are very relevant, and they also are building blocks to a bearish argument and a bullish one. Midpoints are very important to me because of the theory I believe they represent. If a stock is above a key midpoint from a recent range it means that the majority of people are up on their positions, if it is below that midpoint it means the majority is sitting on losses.
Bulls need to keep AAPL above the $550.17 midpoint and bears need to keep it below, pretty simple there. This is more of a psychological analysis than technical but I have had good experience focusing on major midpoints so I will continue to do so. Should AAPL close above $550.17 today, I’d expect more upside in the immediate term.
AAPL is having an easier time going down than it is going up on the daily chart, as displayed in my bullet point above. So while the move off of the lows is impressive, we need to see a greater velocity move upwards on the daily chart for me to gain some bullish confidence. In other words, AAPL needs a daily close back above $580 within the next three trading days.
There is a lot of volume that has traded below $570. From a technical perspective this is a bearish sign in the short term, but potentially a bullish one longer term. $570 was key support from the summer so the fact all this volume is now trading below it means it has become a resistance level. However, a longer term view might argue that any amount of high volume trading above $500 is good thing when a stock has rallied over the years as much as AAPL.
That is because they can argue that all of the people sitting on profits from $500 and below have been able to hit the exits and this is the worst that is happening. In other words, lots of selling from long term holders has likely been absorbed. The risk here is that bulls might be a little too comfortable due to the strength of AAPL’s long term trend. Yes the long term trend is important, but all long term trends start out as short term trends.
Now, as for today’s bounce, what can I say? I was looking for $500 once $525 fell but there was some serious demand hanging out between $520-$530. I find it bullish how hard AAPL has bounced as this has surely caught bears off guard (I know because I am one of those bears). While that’s all well and good, a part of me believes today was more about outright short covering than it was institutions initiating long term positions. One might say that I don’t “trust” the money that came into AAPL today.
Bottom line on AAPL is its time to reevaluate, whether your bullish or bearish. The stock whipped around so hard today that you’d be foolish to not revise your bias, or at least revisit your criteria on which it is founded. Myself personally, if AAPL doesn’t bounce immediately towards $560+ tomorrow (Monday at the latest) I will start looking for a move back towards $500. I’m focused on $550.17. Also, I will pay very close attention to the midpoint of today’s range to see if that level comes into play tomorrow.
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