Sunday, September 20, 2009

Three Cheers (Pennants) for AAPL

I've been in Apple (AAPL) since the stock was $144. I don't use any of AAPL's products, can't afford Mac. I don't particularly adore Steve Jobs, although he has my sympathy for his illness. I'm not a fan of Apple, but I do like what AAPL has been doing in the stock market.

Here's a daily point and figure chart of AAPL. Notice the triangle pennant No.1 on a high pole. I commented in my posts back in May and June, but as usual I didn't act on it (it was right after the violent upswing of the market since March bottom). Then the stock made another pole and pennant (No.2). I bought AAPL during this second formation. (Timing was lousy, as I didn't follow my own advice of buying the pennant break. I bought before the pennant was formed, and which happened to be the same price as the pennant break. Oh well.)

Then, it formed another (irregular) pennant (No.3) and bolted up again. Translated into a regular candlestick chart, it would mean a strong upward movement followed by a brief quiet (low vol) period of consolidation, and then another strong upward movement followed by another period of consolidation.

It has done this burst/rest (or pole/pennant) pattern 3 times since the stock market March low (AAPL's low was in January, by the way). Currently it may be still doing the "pole" part of the 4th pattern. If you count each occasion as one base, it may still have one or two bases upward before it corrects again.

AAPL's 2008 high was $192.24 in May, and its all-time high of $202.96 was back in December 2007, right before the current market correction started. Remember January 2008, when the indices went down every single day for 3 weeks, paused, then continued going down in February? When all was done, AAPL's share price was almost cut in half. In the correction that started in May 2008 and ended for AAPL in January 2009, AAPL lost nearly 60%. Since then it has gained 137%. It's a wild chart if you look at it in a candlestick chart, looking too scary to touch it anywhere.

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