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.

GLD: No Particular Place To Go

but it had better move one way or the other pretty soon, as it is running out space to go.

I have DGP (gold double-long ETN), which I have since last year (I accumulated over several months). I can say two good things about my holding gold via this ETN: 1) it is up 15%; 2) it never dipped below my average price. Beyond that, it's been very frustrating, particularly when other commodity stocks that I own have gained at least 70% this year.

Let's look at the chart of GLD (chart pattern is the same as DGP, different scale). This is a 1-year daily chart. It looks like it is still forming a more or less symmetrical pennant, fast running out of space to run. Other technical indicators - RSI, stochastic - are also running out of space. MACD is flat-lining, and volume has decreased significantly.

A pennant formation is usually a continuation pattern, and tends to break in the direction before the pennant is formed. In the case of GLD, that direction is up. The target price of the pennant, I learned, is the length of the "flag pole" added to the place of the breakout; if it breaks out upward from $95, add the flag pole length of about $30, and you get $125. Should it break down from, say $92, then it could go below the November 08 low of $68.


Gold bugs decry manipulation by central banks and gold dealers (many of whom happen to be Treasury Primary Dealers also). I do understand their chagrin. On many days, spot gold price is high before the U.S. stock market opens, and as soon as the market opens the gold price is slammed down (like it happened today 8/26/09). Oh well. This is my "disaster insurance" holding which happens to take up 1/5 of my portfolio. I just have to make more money elsewhere...