Tuesday, December 1, 2009

What's With AAPL?

Apple (AAPL)'s relentless march upward since March this year seems to have stalled for several weeks. 7 weeks, to be exact. After the stock jumped on the earnings report, it has stayed in a narrow range for the next 6 weeks while other Nasdaq beta stocks like GOOG, AMZN, PCLN just keep going up.

AAPL may be forming a flat base. Just maybe. The volume in the past 7 weeks is low, with one distribution week. A flat base, if I remember O'Neil's book (How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition), is one of the most potentially powerful base from which a stock could explode upward. If that's the case, the breakout point is $208.81, 10 cents above the base high.

Here's a 2-year weekly chart of AAPL. AROON (a lagging indicator) green line is drooping down to 70, entering a danger zone of potential sell-off. MACD and slow stochastics still look good enough, with no diversion. The candlesticks on the chart for the past seven weeks are getting tighter, after initial swing up and down.

Chicken Little in me says "It's going to break down big (and take the market with it!)!!" But if this is a flat base, or if this is a super-deep cup (that was formed over 18 months) and high handle, the target price is somewhere above $300 (depth of the cup added to the handle break). ($300?? Yeah right... right?)

I frankly don't know what to think. The last time AAPL stayed at the same place was back in June this year. It was floating around $140 for 6 weeks, and on the seventh week it burst upward. I caught that ride up. Could that happen again? We will find out soon enough, I hope.

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