AAPL Update

First off, there was a nice little short squeeze during the last 45 mins. or so, we'll get to that. 

As many of you remember, I have long expected 1 final rally before the market moves to the next primary leg down. We have seen a lot of bearish set ups since that expectation was announced and they all were bear traps. You may also recall that I expected Tech and specifically AAPL to lead the move, although I'm not a fan of AAPL for the primary trend and it is one of the core short holdings at a decent profit. In any case, AAPL is getting a bit interesting and saw its own little short squeeze today.

 First we have a little top here, but in this little top we saw some very aggressive distribution activity. Note the bearish pattern formed when AAPL trended down at the red arrow and then formed an ascending triangle which is a bullish consolidation pattern, but has the wrong preceding trend to make it legitimate. Still there was a quick breakout in the yellow box that failed-these are the kinds of failures that technical traders look to short as they offer good positioning and low risk and I believe these are thrown out for technical traders as bait. We saw another move higher in AAPL and as AAPL crossed above that former high in mid June today (as well as above an intraday triangle), we saw a short squeeze.

 The weekly AAPL 3C trend shows where there was heavy accumulation in AAPL and where there has been heavy distribution in to price strength, this is one of the biggest misconceptions traders have, that big volume on falling prices is smart money selling, no they sell in to demand, in to strength as you can see they were selling in to a nearly parabolic move in AAPL.

 Today's triangle on a 1 min chart, check out volume as price passes the former June high and breaks out of the triangle, it may not look like much of a short squeeze, but check out the next chart...

 The nearly uninterrupted diaganol line is exactly what a short squeeze looks like and it happened just as AAPL broke out of that triangle-tomorrow's action should be interesting to see if this was a head fake move. I'd prefer to trade AAPL on a short term basis from the long side and buy in to weakness/pullback. Longer term I'm still holding a profitable AAPL core short position.

 3C 1 min was pretty negative early on, toward mid-day and the afternoon it was more in line. At 3 p.m. there was a positive divergence, this is the timeframe in which we see a lot of middleman activity such as market makers/HFTs, etc. It "looks" a whole lot like the pro's knew exactly where the stops were and gave AAPL a little boost at that white arrow (positive divergence) to push it through the triangle and create a short squeeze. Some longs would have jumped in there as well, so it really would be an ideal set up for a head fake reversal/pullback.

 The 2 min chart was negative in the a.m. and in leading negative position (even though it moved with AAPL most of the day-just lower than it should be for confirmation) , again that positive divergence that led to the breakout of the triangle and the short squeeze is evident.

 As we move to longer charts we get less detail, but also less noise and more trend. While the 3 min is still an intraday timeframe, we can see an excellent example of a relative negative divergence at the red arrow  (comparison between 3C's position and price's at two relative points) and then a leading negative divergence in the red box. At the white arrow we see 3C move up during the short squeeze, but it doesn't give any real signal being it remained in a leading negative position.

 The 5 min chart shows the improving AAPL underlying trade as we saw a VERY weak positive divergence to the far left and heavy distribution in to the run up. In essence it looks like the pros accumulated just enough to get AAPL moving and then sold in to strength in a much bigger way, however shortly after that we see two very strong positive divergences, the one at the lows of the 28th was quite spectacular. Since we have a leading negative divergence; in line with a pullback move, but not so bad as to ruin the positive divergences of late June.

The 4 hour chart shows accumulation in November/December 2011, then confirmation of the uptrend and then very strong distribution in to the March/April highs.

Ultimately I think AAPL will put in an impressive move to the upside, however once that is done, I'd expect to see the same distribution or worse that we saw during March-April. I'll keep the AAPL short open, but in the near term (sub-intermediate trend), AAPL is finally starting to shape up and looks like it is now worthwhile as a long on some price weakness.