(click on the chart to enlarge)
The DJIA came within 0.80 in matching its all time closing high on Friday. Looking at the price action from the DJIA, it doesn’t appear to have formed a top.
The stock that performed well last week was the laggard I have spoken about, GOOGL. In recent post, I have indicated the level near 578 off the rising trend line is the level to watch. If GOOGL breaks below this level, then lower prices will ensue. As it turned out, GOOGL made a valiant stand and bounced off this support level with vigor. It is currently attempting to break above the previous pivot high near 598. If successful, the recent strength could lead to a retest of its all time high up at the 615 level.
Let’s talk a bit about AAPL. I know there are lot of people love their stocks, especially AAPL and I don’t blame them to feel irate by people like me talking negatively on the price of AAPL. But I am a trader and I have to keep it real since I trade base on what I see not what I believe. If you feel uncomfortable on reading or hearing anything negative about AAPL, then I suggest you stop reading now. I will tell it as I see it, and yes, I can be wrong and have been wrong many times before. I never claim to have a crystal ball like many of those promoters pushing their ‘come make money with me’ services. Anyway, let’s talk AAPL.
As I have said in recent post, AAPL near term price target appears to be around the 103/104 level and the technical was warning us of a potential pull back. What it did not warn us is the characteristic of the pull back. And this brings me back to what I have said repeatedly “expect the unexpected.” So what is the unexpected for AAPL? Certainly not the pull back, many traders including myself were prepared for the potential pull back and have been scaling out our position and tighten up our stop. The unexpected is the sharpness of the pull back. I certainly did not expect AAPL to drop 4% in one day and wipe out two weeks of gains in a single session. It is these unexpected events that a trader must be prepared for. Does this pull back imply AAPL stock price is going to fall further? Certain the possibility is there as it printed an inside bar from the last trading session. It has tested the 97ish level and bounced. But depending on which end of the engulfing candle the price decide to break, that will give us clues on which direction AAPL will move in the near term. If it decided to break on the upside, it needs to move above 101 in order to demonstrate it has regained its strength to move up. But the key test will be the 103 level where this sharp drop begins. There could be lot of trapped longs waiting to get out at this level. If the price breaks below the engulfing candle’s low, then watch the level near the rising trend line which is also in confluence with the 50 SMA. If it violates this level, 93ish is a possibility.
Surely AAPL stock price could easily bounced back and even make a new all time high. But the recent price action has created some technical damage and it will need some healing before a resumption of the upward price move can be sustained. For those investors of the stock, the recent price actions could mean nothing. But be reminded, as history has taught us, history is destine to repeat. And are you starting to hear the same echoes as in late 2011 and early 2012 when AAPL move toward the 700 level and when it starts a precipitous decline from the 700+ level?
Next Tuesday APPLE is holding a corporate event and most likely it will be the announcement for the Iphone 6 release. This corporate event will certainly raise the stock price volatility leading into the event. Similar to earnings report, I will not be trading AAPL into these events as the risk to me is undefined.
Always be prepared for what can go wrong not for what can go right! Don’t be part of the herd and trade your plan!
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Disclosure: Long DIA call options & GOOGL.
