June 10, 2013 (12:00pm)
As we head into the WWDC keynote, we thought it would be useful to lay out where Apple stands on the charts. While most Apple watchers have been spending time speculating on the new iOS features and look, we remain hopeful that the company will release a software developers kit (SDK) to open up the Apple TV to new features. You can see our thoughts in a March post here.
Summary. Shares of Apple formed an enormous falling wedge over the past eight months. More recently, the shares broke out and successfully re-tested the break-out point. You can see, based on the thin blue lines, that while price was decreasing, RSI (also known as the momentum of the stock) remained flat and MACD constantly rose. This is a sign that downside momentum weakened throughout the second half of the correction. Additionally, the 50 DMA that acted as key resistance throughout the downturn has now turned into support. You can see that the shares held that key level last week after testing it twice. We’re now trading above the 50 DMA and 100 DMA, while attempting to hold the 10 DMA.
Inverse Head & Shoulders. We put this chart together almost a month ago and have not re-drawn any of the lines since then (although you can see the price has continued to update). After re-testing the 50 DMA level, the shares have traded back up. If we can break through the $465 level, capturing $500 is extremely likely. We’d also expect a full move up to the $545 target because so many technical traders, momentum traders and investors have been watching to see how this will play out. Only a strong break (hopefully with high volume) above the $465 neckline will confirm this pattern.
Weekly Perspective. You can disregard most of the annotations on this chart. We’ve been watching at a variety of technical set-ups for many months now – many of which no longer apply. The keys to take away from this are threefold. First, notice that the shares held the first “Strong Support” blue line. That support was formed during the second half of 2011. The low of $385 was put in almost precisely at that support level. Second, notice the MACD at the bottom. This is an extremely bullish sign, and bodes will for the long term health of the stock. For the first time since the last week of September, it has turned bullish. Lastly, check out that beautiful bullish pennant / symmetrical triangle that formed since the low was put in. We’re very near the apex of the pennant.
Conclusion. One chart we didn’t show was the daily chart with bollinger bands. The BBands are extremely compressed at this point – with a width of only $25. To give you some perspective, the average width has been over $70 for the past year (and over $50 for the past 5 years – even with a price point much lower). A dramatic move is coming… and soon. But remember that the move can go either way. However, based on the other evidence (and 10.6x LTM PE), we’re leaning towards the bullish scenario and are positioned longer-term for a bullish move.