The US stock market is a leading influence on world investor sentiment and the big info tech companies have been its champion in recent years. None more so than Apple which is currently in the limelight with the release of iphone5.
The latest downtrend looks like an ABC correction that has found a bottom at a Fibonacci cluster zone. If this interpretation of the chart is correct we are set for a rally that will take us beyond the all time high at $705.
Before drilling down to the detail of the ABC set up, I’ve started with a bigger view via the weekly chart.
The last time Apple was below its 200 day moving average was back in June 2011. As well as flicking under the moving average then it also bounced off the blue trend line at $310.66.
Since then Apple has gone into a new gear with a much steeper rally. This has left a lot of blank space between both the trend line and the long term moving average.
The move since departing from the trend line looks to be in the form of a 5 swing advance which I’ve labelled on the chart below. When we drill down into the daily chart there’s a case to say that the 5th and final swing in this large advance has further to go.
Before I get onto the daily chart though, it’s worth pointing out that the fast stochastic on the weekly has just rolled over with %K moving above %D. This would be consistent with the possibility of another leg up. A similar thing happened around the major low marked “4”.
The daily chart below zooms in on the rally since the low at “4”.
Since then we seem to have completed 3 swings higher (labelled in blue). The latest move down has taken a 3 swing or ABC form. The low at “c” finished very close to a cluster of Fibonacci projections. These consisted of a 61.8% retracement of the swing up from “2” to”3″ and a projection that the b to c swing will be the same size (100%) of the move from 3 down to “a”.
The daily stochastic has just swung higher out of the oversold zone which confirms the picture of rising upside momentum shown by the weekly stochastic.
So Apple represents an example of the GartleyABC buy set up we often feature in our blog. If successful, this suggests a final move higher past the peak at “3” ($705). If this market road map is on song, a significant downward correction could follow the next major peak.
In the meantime one approach to strategy would be to place an initial stop behind the low at c and to take partial profit half way between the peaks at “b” and “3”.
If an uptrend gets under way here, I’ll post a follow up with thoughts on a final profit objective and strategies for moving the stop to protect profits.