11-17-12

NOT A RECOMMENDATION. FOR EDUCATIONAL PURPOSES ONLY.

Feeling a bounce opportunity in Apple (AAPL). The stock started an uptrend in Feb 2009 and recently has seen selling by the big boys starting in September 2012.  Overall the the trend is still in tact from the lower red trend line.

Ideally, I would like to see the stock around 465 (lower trend line) before entering, but took a position on Friday.  If it doesn't work out I don't care.  It is all about risk and reward.
The overall market is extremely oversold and this leader has gotten hit hard as evidenced above with 8 weeks of selling.  At some point the shorts have to cover producing buy orders (profit taking) allowing the stock to go higher.  Typically when we are extremely oversold we get at least two days of buying in the general market.  We saw one day on Friday.  See what happened last time it touched support (white line) in May/June 2012.  Apple had some buying on Friday with 60% more volume.  Is this the start of something? See below (last green bar).

Taken into account:
1. Extremely oversold conditions (market and this stock)
2. Apple at prior support (white line)
3. Shorts covering and volume from Friday
4. Possible X-mas rally

Seems like a good SHORT TERM buy.

If this stock does rally I see it possibly going to 600 (roughly the 200 day moving average - red line) to roughly the third green arrow (above).  With that said, we possibly have a head and shoulder formation on the stock (green arrows), which could produce a measured move to 350ish over the next couple of months assuming AAPL has no new inventions - sorry to all the bullish investors. This level was a prior support/resist area  in the middle of 2011.

At the end of the day this is my opinion.  It is very possible I am wrong which is why I'll be watching the price and volume action.  Start looking for the next wave of leaders.  Happy Trading.