Is Apple Pulling an Amazon?

Apple’s recent sell-off has as usual generated a lot of debate about whether this is just another buying opportunity or if this is truly “THE” end for $AAPL and that it’s all downhill from here. Of course, you have both sides arguing all the fundamentals of the (Apple) world.

As a trader, I realize fundamentals are important, but fundamentals do not tell you whether the risk:reward of the trade is favorable or where your entry should be. That’s why its important to be able to do some technical analysis (TA) and know how to manage positions.

This bring me back to $AAPL. If you are bearish, a short here is very unfavorable. The stock is already down 24% from the high in a little less than 2 months. However, this does not mean a long is the correct trade right here right now. The stock could head much lower before heading back up.

This is where TA and trade management steps in. Let’s take a look at $AAPL. It’s been in a downtrend since hitting it’s all-time high in late September. The short and medium terms moving averages have rolled over and we are trading below the 200 day. But most importantly, we are trending and trading below the downtrend line (Not the cleanest trend-line on the daily but very clean on weekly). Not only this, but the volume on the downside has been very heavy and we still see no bullish RSI divergences.

$AAPL Daily

 

So, where’s the trade in $AAPL here? I don’t know, all I know is that unless you want to scale in with very small size at a major support level (I’d watch 522, 445 and below that 425 -remember these are areas, not exact numbers) with a reasonable stop, then the trade is here is to wait. Why?

This gets me back to $AMZN. This pattern being exhibited by Apple is nearly identical to Amazon from about a year ago. Now, does this mean that Apple will have the SAME pattern? No.  But by understanding what it takes for a stock to bottom, you could potentially save yourself from any losses and negative stress.

As you see, $AMZN was in a nasty downtrend, had the moving averages rolling over, and was trading below its 200 day. Similarly, the volume was heavy and there was only a small bullish divergence near the bottom. However, it did not bounce straight from there to all-time highs. It built a very nice base before making it’s run to all-time highs set in September of this year.

$AMZN daily (Last year)

 

Tags: $AMZN $AAPL $STUDY 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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