Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 18 December 2012 at 11:22 GMT

AAPL - Bullish engulfing pattern signals bounce

Technical Analyst / Saxo Bank

Trade Parameters

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.

Possible Apple bounce

Non-independent investment research
This investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Further it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Saxo Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein. 
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SergiiTkachenko SergiiTkachenko
Buckle up.
Allan Kamara Allan Kamara
Great call.
SergiiTkachenko SergiiTkachenko
Thursday trades Apple closed at 515. The Friday is the last day of trades before New Year. Have no idea what stocks will looks like in 2013. Thinking about closing position on current market price at the end of the trades or at parity price which is 225 somewhat. Any other opinion?


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