Apple – thoughts on the long term chart outlook

One of the most notable features of the current market landscape is Apple’s 37% decline since September while the broad US SPX Index CFD has risen 3.5% over the same period.

We’ve had a lot of client interest in the outlook for Apple so I thought this may be the time to blog some thoughts on the long term chart.

 Big Picture

Between January 2009 and November 2011, the Apple share price increased fivefold from $78 to $390. During this time it followed what for many was a magnificent, orderly uptrend. The trend took the form of a well defined channel with major corrections bouncing off support at the bottom of the channel or the 40 week (200 day) moving average.

From the November 2011, the trend became steeper, beginning what with the benefit of hindsight, formed a blowout top.  During this time price increased a further 80% to peak above $700 in September 2012. Since then of course Apple shares have fallen sharply breaking below the 40 week moving average in late October and last week, taking out the trend line established in 2009.

The RSI on the weekly chart proved to be a good indicator of the final peak showing strong divergence with price.  It has continued to fall since but is still outside the oversold zone and not inconsistent with further falls to come. 

Apple CFD - Weekly. Source CMC Tracker

Apple CFD – Weekly. Source CMC Tracker

Is this a correction?

Despite the size of the recent decline and the break below the trend line, an Elliot Wave analysis of this chart looks consistent with the move down being a correction of the 2009/2012 advance and not something that’s likely to break below the 2009 low.

This view of the chart is based on the 2009/2012 rally being a 5 swing structure that has so far been followed by a 3 swing or ABC decline. This is the classic Elliot corrective structure.

Apple CFD - Weekly

Apple CFD – Weekly

 Fibonacci Cluster 

There is an interesting Fibonacci cluster at around $395 on the Apple chart. This is shown above and consists of:

  • The 78.6% retracement of the 0/5 rally
  • A projection that the swing down from B to C will be the same size as (100% of) the A to B swing. This projection can be done using the Fibonacci Price tool in Tracker’s drawing tools

Readers who watched my video on Fibonacci will know that my view is that Fib levels are best not viewed as potential supports. So this blog is not intended to predict that price will fall to $395.

However, if price does fall to and then stop at or close this level, it would be the classic Gartley ABC set up and something that traders of this strategy will be watching closely as a buying opportunity.

About Ric Spooner

Over 30 years market experience - professional trader, broker, director
This entry was posted in Market, Shares, Stocks, Trading and tagged , , , , , , , , . Bookmark the permalink.

5 Responses to Apple – thoughts on the long term chart outlook

  1. @JackieTheTrader says:

    My chart http://twitpic.com/bz4za3 in my tweet yesterday supports this thinking about a possible long entry near $395, as long as the impulsive wave structure counted complete. That said, there’s no gurantee the correction from $705 will be a simple ABC (it could be more complex with a short term rise to the $500s but then making a new low below the $395). A complex correction is possible due to the recent disconnect between AAPL and the NASQAQ (AAPL has falllen but the NASDAQ hasn’t). If the NASDAQ starts falling later, this could maintain a bearish outlook on AAPL well after wave C has completed.

  2. Gary Ferguson says:

    Hi Ric, We should also consider the possibility that the top of wave 5 is a peak, there has been a major trend change and waves A and B are Waves 1 and 2 of the 5 wave reverse. If this is so it may be a warning of a similar peak imminent in the Dow, S&P 500 and Nasdaq etc.
    regards,
    Gary

    • Ric Spooner says:

      Hi Gary,

      I agree. You and @JackieTheTrader have both made the point that this may be the start of something bigger.

      I should have more fully explained that my stance is basically to take a wait and see mode. If the current decline stays as an ABC structure and either finishes at the Fib cluster or overlaps back above “A” then the odds start to favour a correction and from a trading point of view a chance to test the water on the long side with a close stop.

      But if as you say the decline stays impulsive and keeps falling then we could be looking at the first 2 waves of a bigger decline

  3. dv34 says:

    I agree with you Ric, the gartley is pretty clear, there is also another fib pattern on this chart as well called a bullish cypher where the top is measured from wave 3 up, A is 127% extension of 3 to 5 and then a three wave decline to 78.6% – which would also trigger at the same gartley 78.6% level, interestingly 390 – 392 is a 50% retrace of the whole move from Jan 2009 on a monthly chart, and this sharp decline could simply be a wave A retracement of the 3rd wave upswing and possibly rally back up to 585 again for a wave B then have a larger correction lower…

  4. daveold says:

    I agree Ric with the ABC pattern being the high probability count. When I spotted this a while back I took the upmove fib projections from the 78.20 low made in Jan 2009. This projects 50% ret level coinciding almost exactly with the 100% ABC symmetry level at 391/396 levels. Also I feel the fundamentals might support this simple corrective stance should AAPL intro iTV quite soon, who knows ?

    David.

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