Apple: We’ve Been Here Before (Part II)

May 15, 2013 (12:30 pm)

We were looking through our older charts and thought it would be interesting to take another look at the chart below. The recent stock formation continues to bear a stark resemblance to the 2006-2009 share price pattern. You can see our previous post here for some context and to compare where we were 10 weeks ago to the current set-up.

AAPL Repeating Past

For a brief overview of the set-up, each pattern shows four waves (comprised of five points A,B,C,D,E). The first wave (AB) is a dramatic rally. The second wave (BC) is a correction that retraces approximately 50% of the previous rally. The third wave (CD) rallies again to within 5% of the previous high. The fourth, and last wave (DE), just about doubles the second wave correction and ends in a relatively long consolidation period for the stock (the green and blue square boxes).

The more recent price pattern (blue) is a very close comparison to the previous 2006-2009 pattern (green), except the more recent one has a much more compressed time frame. During the previous consolidation period (green square), we saw three sequential lower lows – the third low was the final low. During the current pattern, we’ve seen the same pattern play out. The $385 low was the third low in the box. Finally, we saw a single re-test of the low (again, we’re seeing the same thing with today’s price action). After that, the shares were off to the races.

The timing here is interesting. Whether the re-test of the low takes place at the 50 DMA around $430, at the inverse head and shoulders level of $420, or a bit lower than that, we continue to expect a rally heading into the WWDC in early June. This re-test of the low $400’s may be viewed in the future as one of those “great buying opportunities” that we can only see with the benefit of hindsight.

  • Kimcalaho

    Dave, in the past 9 years, AAPL has posted its high in May pre-expiry 70% of the time. With May 8th being the closing high, I suspect that we will definitely be around 420 post expiry if not lower. However, the first week in June as well as May tends to be where a pop has existed historically. It will be interesting to see if past is prologue!