AAPL - Bullish engulfing pattern signals bounce
Position: Enter at open today.
Initial stop: 501.20
Target level. 558.70-572.30
Indicators signal a bounce
A few days ago one of my co-bloggers Johan wrote about a potential bounce in Apple. I did agree with him somewhat but wanted some confirmation before entering a trade.
This confirmation came Monday, with a bullish engulfing pattern and RSI divergence. From the open, market makers tried to create a new sell-off, but bargain hunters and other investors eyeing a buying opportunity entered the stock and drove prices higher. Positive news from Fiscal Cliff negotiations also lifted the market in general.
Divergence on RSI also indicates that the recent drop is a bit overdone short-term. Volume has also been falling during the bearish move the past week, but picked up especially Friday and yesterday. A correction to resistance levels could be quick and tight stops should be placed.
Longer term view still bearish
My longer term view on Apple remains bearish, as described in my story A technical look at Apple stock - and the indicators are bearish, regardless of a possible bounce in the stock.
How big a bounce?
It is of course always hard to tell how far a move can go, especially when the indicators points in different directions. But a bounce to at least to the first Fibonacci resistance level (0.382) at around 536.75 is a minimum. A break above the last high on 11th December at 549.55 just above the 0.5 Fibonacci retracement level could fuel a further move to 558.72 and 572.30.
Resistance: 536.75, 547.75, 558.72 and 572.30
Risk: Bollinger bands are still expanding still indicating a bearish trend. A break below stop at 501.20 could fuel a new bearish move to new lows at around 471.95. MACD is also still indicating a bearish scenario. (Rumours about) weak Christmas sales numbers could turn the mood sour again.
Non-independent investment research
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