Monday, August 25, 2014

AAPL Update / Trade-Set-up / Bellwether

AAPL makes for a nice bellwether for the simple reason that it had one of the strongest positive divergences or at least one that was in line and confirming the trend, which is now doing something else.

I have a stop for you as well as I know some of you entered AAPL long as a piggy back trade from our base and/or a hedge.

 AAPL formed a base the same 6-days as almost every other asset and market average from 8/1 to 8/8 and broke out 8/11. The 60 min Trend Channel has held the entire move up in AAPL without a single stop out, the current stop level (which should lock in some more upside gains over the next few bars) is currently at $101.25, with a 60 min candle closing below that level acting as a stop.

I can see the channel's Rate of Change is starting to turn off to the side which suggests a stop soon and a reversal soon after. AAPL would be one asset I'd be very interested in a put position. Look for a well formed area of resistance just above, a move through that would be where I'd want to enter a put position, although as always it needs to be confirmed. However probabilities on the daily chart says it's exceptionally high that any potential head fake move would be a great put set-up, otherwise an AAPL equity short would work from these levels as well as I suspect you probably have over 50% of potential downside over the next year.

 AAPL's Trend Channel  ROC

The first AAPL top we called (which was the worst as everyone thought AAPL could do no wrong) as AAPL was just hitting new highs was mostly on intraday charts, the daily did show trouble brewing in the area, but the charts in the 60 min to 4 hour range were the ones that really did the bulk of the work as AAPL lost -45% in 8 months right after Third Point filed a 13F that showed AAPL was no longer a top 5 holding, creating an institutional panic. The rally in AAPL is interesting, but its in far worse shape now than it was in 2012, I'm sure it's not hard to understand why when AAPL "seemed " bullet proof and was a major growth stock, then came the dividends, buybacks, etc. and AAPL transitioned toward a MSFT story which had been an even bigger growth story until the dividends, etc. when it became a range-bound large cap.

 AAPL's 60 min chart doesn't show a very distinct positive divergence , that's because it's not that strong as to be very clear on this timeframe. There has been good confirmation of AAPL's trend by 3C, however that has recently changed.

Not being as strong as the 60 min chart, the 30 min chart does show a clearer positive divegrence, again at the same time as the rest of the market, it also shows a clear negative divergence, the divergence doesn't start at the left side of the red arrow, but rather the right side. However some faster timeframes will show distribution before the 30 min chart for the same reason the 30 min chart shows the base better than the 60 min chart.

The 15 min chart isn't looking at underlying flow as heavy as the 30 and 60 min charts so the divergences will be more pronounced.

 AAPL10 min also showing the same so there's a good deal of confirmation here.

The 3 min chart.

I didn't get in to timeframes below as they'll develop as we go, but the changing trend is clear, it's just a matter of the entry and the type of trade based on short term price action. I suspect AAPL's 60 min trend channel stops out within a day or so.

No comments: