2 signs that Apple is bottoming

The tech giant has been in a steady downtrend since its September peak, but there are technical signs that it might finally be ready to bounce back.

By MoneyShow.com May 31, 2013 2:39PM

The Apple Inc. logo is displayed on the back of the new MacBook Pro David Paul Morris, Bloomberg via Getty ImagesBy Tom Aspray 


The stock market put in a good performance on Thursday with small caps, banks, and semiconductors doing the best. The market internals were also positive and this has kept the daily technical studies within their recent trading ranges.


Disappointing data from the Eurozone has pushed their markets lower early Friday with losses across the board. The S&P futures are also down in early trading and a weekly close in the June contract below 1632.75 on Friday would be a short-term negative. The key level for the Spyder Trust (SPY) is at $163.94.


Of course, one stock that has been much weaker than the market over the past six months is Apple Inc. (AAPL) as it is down 23.4% versus a 16.8% gain in the S&P 500. 


There is an Apple developers meeting on June 11 but as candlestick and pivot expert John Person (PersonPlanet) pointed out, the stock could trigger a monthly high close doji (HCD) today. This is one of the two signs that Apple may finally be bottoming.


chart
Click to Enlarge


Chart Analysis: The monthly chart of Apple shows that in addition to the weekly low close doji (LCD) that formed at the September highs, a monthly LCD was triggered at the end of October (see arrow).

  • From the high at $705.07 to the April low of $385.10, it was a drop of over 45%.
  • The monthly chart shows that a doji was formed in April as AAPL opened at $441.90 and closed April at $442.78.
  • Therefore, a close today above the April high of $445.25 will trigger a monthly HCD.
  • The monthly analysis (MoneyShow) for AAPL was positive from July 2009 until November 2012 when the relative performance dropped below its WMA.
  • The RS line did confirm the September highs.
  • The OBV is also below its WMA but turned up from support in March, line b, and looks ready to close May back above its WMA.
  • The quarterly pivot resistance is at $465.86 with the 38.2% Fibonacci retracement resistance at $507.73.
  • The monthly support is in the $441 to 443 area.

The daily chart of Apple appears to be forming a reverse head-and-shoulders bottom formation. 

  • The left shoulder (LS) was formed in March with the low on April 19 being the head.
  • The decline three weeks ago when AAPL had a low of $418.90 is likely the left shoulder (LS).
  • The neckline is currently at $465.25 but is derived from the March high at $469.95 and the early May high of $465.70.
  • A completion of the reverse H&S formation is in the $548-$555 area.
  • The daily relative performance is back above its WMA and is now testing its downtrend, line c.
  • The RS line has good support at line d.
  • The daily on-balance volume (OBV) is also above its WMA and a close above the resistance at line e, would confirm a bottom.
  • The weekly OBV (not shown) is also above its WMA.
  • The monthly pivot is at $425.07, which corresponds to the minor 50% Fibonacci retracement support.

What it Means: The bullish sentiment for Apple has certainly taken a big hit in 2013 as it is not uncommon now for analysts to speculate that it will never again be a market leader. Anyone who voiced such an opinion a year ago was guaranteed to get a flood of angry emails.


The combination of a monthly HCD and the completion of the reverse H&S bottom will project that AAPL could reach the $550 level in 2013. A two-stage buying process is advised.


How to Profit: For AAPL, go 50% long at $449.50 or better with a stop at $414.66. I would add a 50% long position on a daily close above $466 with a stop at $428.80.

Tags: AAPLSPY
6Comments
Jun 1, 2013 9:26AM
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Sometimes the market is out of wack. Apple has a P?E of 10 while people are plowing money into staple companies like Con Agra with a P?E of 23 or more. Always look at price to earnings ratios, debt ratios and what they produce. Apple, or other tech,  can come up with a new product and continue its upward course but food and staple companies can only sell so many tv dinners and boxes of klenex. Don't get me wrong, staple companies have a place in any portfolio , and I have them, but tech will usually pay back more.   
May 31, 2013 8:04PM
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Let's see it's down 40% and everyone's sold it already!
Jun 1, 2013 9:44AM
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I would avoid making any bets on this stock based upon the author's (TA) analysis.

Apple has grown to be a huge company (market capitalization), and I believe it days as a growth company are behind it, and it's becoming more and more a commodity company. Of course, it might generate some growth if it can find a cheap way to do time travel. 

It also has plenty of competition like Samsung which makes stuff just as good and cheaper. Anyway, I expect it to mature in to a company with a reasonable P/E and dividend to keep its loyal shareholders. 

Har har har me mateys!
Jun 1, 2013 8:01AM
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In my opinion, Apple has been overrated a long time. A computer is only as good as the internet. I bought an I pod and found the same problems as with my old Dell. And the service is not as good as everybody wants you to believe. I had better.
Jun 1, 2013 3:56PM
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this company has so much going for it now and a hoard of cash plus paying a good dividen it should be a no brainer BUT IT HAS LOST FAVOR WITH CNBC iwill continue to buy
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