Triple Timeframe Chart Flyby of Apple (AAPL)

With all eyes focusing on the earnings announcement post-market close January 25th and then the 'mystery' product event announcement on January 27th, I thought it would be a good time to take a triple timeframe "fly-by" of the monthly, weekly, and daily chart of Apple (NQ: AAPL). 

Let's start with the 'big picture' Monthly Chart:

At first glance, it's difficult to imagine that Apple's stock price was at the $15 per share level six years ago in 2004.  We now sit 1,333% higher at $200 per share after a long and winding road to the current level.

The pullback to the rising 20 month moving average in July 2006 and February 2008 are good examples how that moving average - in a strongly trending environment - can be a strong support level, and thus place to establish a longer-term low-risk position in the stock.

A quick glance shows us that the current 20 EMA at $160 rests far below price currently, and studies show that price does not stay extended for long periods of time above the 20 period average - it often acts like a magnet when price rockets too far from it - keep this in mind on the larger scale.

For the moment, price has formed a bearish engulfing candle at the upper monthly Bollinger Band - that's a sell-signal, but remember that this candle is not officially complete - the candle completes on Friday when January ends, so we'll need to wait until then to see what the final 'candle' for January becomes. 

For now, the monthly chart warns of "Caution!  Overbought prices ahead!" and we thus turn to the weekly chart for additional clues.

Now that looks better.  We see clear support levels under current prices, starting with a cluster at the $190 per share level which reflects the prior mid-2008 price highs (which are expected to become future support levels) and the 20 week EMA.

It would be a very bad sign if sellers could push price lower from here to crack under the $190 confluence weekly support level, so a bullish posture is favored while we are above this "line in the sand."

Taking a look at volume and momentum, we see a negative momentum and volume divergence, which serve as non-confirmations of the recent rally - again, a caution sign but not yet a 'panic' sign while price is above support.

In the event sellers push price under the $190 level, we would then look to target intermediate support at the 50 week EMA at $170.

For a closer look, let's drop to the daily chart.

At the moment, the chart structure (technical picture) does not look extraordinarily bullish - in fact, price has broken under the 50 day EMA at $202.50 per share.  Buyers need to use the earnings announcement and the product launch to push price back above this level, or else risk ceding ground to the sellers.

From a chart perspective, if price remains under the 50 EMA at the $200 level, then the next daily support target - which also merges with the weekly support mentioned above - is $190. 

Again, it would be a very, very significant (bearish) development if sellers push price under $190.

Otherwise, if buyers jump in to Apple thanks to earnings and bullish expectations on the new products yet to be announced (Tablet PC?  Upgrades to iTunes?  iPhone Upgrades?), then we would expect the charts to turn more bullish as price rises steadily above the daily EMAs shown here.

Upper resistance comes in at the all-time highs of $215 per share, and the sky is the limit (price is in an uptrend, and - as the saying goes "In Bull Markets, There is NO Resistance") for upside potential.

Right now, the picture is murky, but we should know which way price is likely to travel by Tuesday and then especially by Wednesday and Thursday after all the news properly hits the market.

As a 'technical reminder,' earnings announcements and the market's reaction to them are unpredictable, so it helps to know key levels (as mentioned here) to watch in advance and then develop at least two scenarios - a bullish scenario and a bearish scenario - based on your reading of the price charts.

Then, adjust course as needed and do not fight a momentum move that occurs - price can move quickly, gap strongly, and form intraday trend days after major announcements.

It should be fun so stay tuned!

Corey Rosenbloom, CMT

http://blog.afraidtotrade.com

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