Stock Market Viewpoint

Stock Market Viewpoint
Reading the Tea Leaves...

Wednesday, January 6, 2016

How Far Can An AAPL Fall From the Tree?

As AAPL approaches the mighty $100 benchmark, the question of the week is will the big Wall Street firms pony up and keep their darling from becoming a two digit stock or will the powerful message in the two charts below rule AAPL's midterm future?

In the top chart, I posted the two primary EMAs that AAPL has used to climb with for years on its weekly chart.  By looking at it you can see that each time the smaller red EMA line bounces up from the larger green EMA line AAPL gets a minimum of six to nine months of upward travel from it. Looking across this seven year chart of weekly bars you can see that the six to nine months off this line to line bounce is always the move that's achieved.  

Six weeks ago, however, AAPL started an inverted interaction where the green line was pushing the red line downward for the first time in AAPL's history.  This particular setup is actually of higher quality than the upward pointing counterparts that I marked with green in the chart as it has a more rounded cup shape to the red line's interaction.  Six to nine months of downward travel is a given and possibly more considering the high quality of this "push down" setup.  

Looking at the bottom chart which has APPL's two long term primary channels drawn, I have marked in with blue lines the giant head and shoulders topping pattern that has been the buzz of the trading community for the past week as AAPL broke down through its neckline Monday morning and it's not just a regular neckline, this line is also the upper channel line of AAPL's mother channel going way back.

The obvious downside target now is the 82 area where AAPL will catch the support of the lower line of its uphill seven year bull channel.  The question is will Wall Street come in now, as it is at the even 100 mark which is such a benchmark number to be above or below, and defend their darling aggressively as it is the largest holding of most all the Wall Street firms.  

Considering that there are two very powerful forces pushing AAPL downward at the key 100 mark, one has to wonder just how far AAPL can fall from the tree?

Trade well my friends


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