Two Signs That Apple Is Bottoming

by Tom Aspray

The stocks market put in a good performance on Thursday with small caps, banks, and semiconductors doing the best. The market internals were also positive and this has kept the daily technical studies within their recent trading ranges.

Disappointing data from the Eurozone has pushed their markets lower early Friday with losses across the board. The S&P futures are also down in early trading and a weekly close in the June contract below 1632.75 on Friday would be a short-term negative. The key level for the Spyder Trust (SPY) is at $163.94.

Of course, one stock that has been much weaker than the market over the past six months is Apple Apple Inc. (AAPL) as it is down 23.4% versus a 16.8% gain in the S&P 500. There is an Apple developers meeting on June 11 but as candlestick and pivot expert John Person pointed out, the stock could trigger a monthly HCD today. This is one of the two signs that Apple Inc. (AAPL) may finally be bottoming.

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Chart Analysis: The monthly chart of Apple Inc. (AAPL) shows that in addition to the weekly LCD that formed at the September highs, a monthly LCD was triggered at the end of October (see arrow).

• From the high at $705.07 to the April low of $385.10, it was a drop of over 45%.
• The monthly chart shows that a doji was formed in April as AAPL opened at $441.90 and closed April at $442.78.
• Therefore, a close today above the April high of $445.25 will trigger a monthly HCD.
• The monthly analysis for AAPL was positive from July 2009 until November 2012 when the relative performance dropped below its WMA.
• The RS line did confirm the September highs.
• The OBV is also below its WMA but turned up from support in March, line b, and looks ready to close May back above its WMA.
• The quarterly pivot resistance is at $465.86 with the 38.2% Fibonacci retracement resistance at $507.73.
• The monthly support is in the $441-443 area.

The daily chart of Apple Inc. (AAPL) appears to be forming a reverse head-and-shoulders bottom formation.

• The left shoulder (LS) was formed in March with the low on April 19 being the head.
• The decline three weeks ago when AAPL had a low of $418.90 is likely the left shoulder (LS).
• The neckline is currently at $465.25 but is derived from the March high at $469.95 and the early May high of $465.70.
• A completion of the reverse H&S formation is in the $548-$555 area.
• The daily relative performance is back above its WMA and is now testing its downtrend, line c.
• The RS line has good support at line d.
• The daily on-balance volume (OBV) is also above its WMA and a close above the resistance at line e, would confirm a bottom.
• The weekly OBV (not shown) is also above its WMA.
• The monthly pivot is at $425.07 which corresponds to the minor 50% Fibonacci retracement support.

What it Means: The bullish sentiment for Apple has certainly taken a big hit in 2013 as it is not uncommon now for analysts to speculate that it will never again be a market leader. Anyone who voiced such an opinion a year ago was guaranteed to get a flood of angry emails.

The combination of a monthly HCD and the completion of the reverse H&S bottom will project that APPL could reach the $550 level in 2013. A two-stage buying process is advised.

How to Profit: For Apple Inc. (AAPL), go 50% long at $449.50 or better with a stop at $414.66. I would add a 50% long position on a daily close above $466 with a stop at $428.80.

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