I decided to do some analysis of AAPL in response to an article that Brandon at Trading Wall Street wrote yesterday: More Upside in Apple Inc. (AAPL)

Brandon did a really bang up job of combining fundamental and technical analysis of AAPL. What I take from what he wrote is that he believes that the fundamental of AAPL are so strong that the current bearishness in the chart can be overcome.

My Analysis
Although Apple has run up almost 250% since november of last year, the chart is looking extremely top heavy. While there is no indicator of a full on reversal, there are clear signs of a correction coming.

The chart itself looked to be forming a coiled spring. Unfortunately, you would expect coiled springs to breakout within 7 to 20 days. There is also the fact that MA(50) has crossed below MA(20) which is fairly bearish, and signals a reversal in trend.

The first indicator I fired up in this chart is fire up a slightly slower MACD (19,39,9). I tend to use these settings when looking for sell signals. The MACD in this chart is clearly divergent from price.

Second, I check momentum. Combine the MACD, a divergence in the 3-10, and a roll over in On Balance True Range, and you have a clear indication that momentum has left building.

Third, let’s see what the big boys are doing… Take a look a the Balance of Power. It certainly looks like the institutions are taking profits off the table at these levels.

Fourth, I check the ADX to see if the uptrend has any strength, and with a reading of 16.43 and a bearish DMI cross the DMI indicator is also bearish.

Finally, let’s check the trade triangles… Red daily, red weekly, green monthly signals a week downtrend in the intermediate time frame with a bullish long term trend.

So how far should AAPL correct before possibly turning back up? As you can see in the chart, I think 177 would be a good place start accumulating shares.

One of the big success stories in 2009 was the rise of Apple. With its sexy new products like the iPhone, the iPod, and the iMac, Apple has seen its fortunes rise in dramatic fashion.

So what’s happening just before the holidays with Apple? Why are we seeing Apple stutter and falter? In my new video, I share with you what I believe is going to happen to one of my favorite markets.

I will also share with you the Apple trading results for 2009 using our “Trade Triangle” technology. The results have been good, in fact, very good. I think you’ll enjoy seeing how we made out in Apple.

As always our videos are free to watch and there is no need for registration.

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

Take care,

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