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.

AAPL's Second Deep Cup and Handle

That's what I'm seeing. This morning's headfake (dipping down briefly to fool bears) didn't fake Apple (AAPL). It is currently up $6 (5%) and trading at $129, vastly outperforming Nasdaq. From the looks of it, for the first time in several weeks, the trading volume seems set to increase.

The last time I traded AAPL long was exactly one year ago, when just about everyone was excited with the prospect of a massive "cup and handle" formation on Nasdaq index, and many of its components, particularly AAPL. Then the handle started to get longer and droopier, and the rest is sad history. (The market decline, in my opinion, started in early June last year, not October.)

Let's take a look at AAPL's 2 year weekly chart. The first cup and handle that people were so excited about last year now looks more like a V. The second cup and handle, the one I'm seeing now, is slightly better shaped (just because it took longer to form). Since the current low undercut the previous low, (if I remember what I read...) this would be considered the first base. The handle high is $133.50, only slightly above 50% retracement from the low to the beginning of the cup (August 08). That is a bit low for my liking but not too bad either considering how the general market had crashed.

If the handle break occurs, it could go on to fill the gap from September 08 (September?? Oooh I just noticed that AAPL crashed in September 08, not October when the general market crashed). My target would be about $160, if that's the case.

AAPL's Point and Figure chart has a dreamy, almost hallucinatory target of $231, by the way. It has a very peculiar formation, like a flag pole and a tiny pennant flying.

What I didn't like and still don't like about lots of big-cap Nasdaq stocks is that their volume on the way up since March 6 low is very subdued. I've heard arguments that since the stronger hands are buying these stocks, you don't need volume. Maybe, up till now. In order to break out of the seemingly constructive formation (cup and handle), the stock needs more volume. The proverbial "money on the sideline" has to come in.