AAPLTalk Weekend, Sunday Edition: Working Around The Four-Letter “S” Word Many Bulls Hate to Say, Much Less Think

SELL. 😀  (Warning, this post is longer than normal, and people already familiar with “level by level” and have already run the numbers with AAPL may just want to skip over this one.)

I’m not telling AAPL bulls that they should s-e-l-l, or shouldn’t.  (I’m currently a bull myself.)

I’m not telling anyone that they should do anything.  I lack the qualifications, after all.

But speaking from experience, it never hurts, as un-utterable of an S-word that it is, to at least think of…trimming and trailing…lightening up on risk…raising cash…lowering exposure…reducing account beta…

Whatever euphemism works best.

While we’re on the topic of NOT SELLING, it might or might not be useful to talk those most basic of stock signposts – price points, also known as levels.  And there’s a dizzying array of levels to contend with both up and down the scale.

AAPL pretty much consolidated post-Icahn (it’s tempting to switch the capitalization of the first two letters there), so there aren’t really any new levels to the upside to keep an eye on (that I think I see, anyway).  To recap, 504-505 is a critical resistance region.  Around 515 has shown itself be support, resistance as well as an action area.  The mega-macro trendline I’ve been following should be in the mid-high 520s or so by the end of next week, though its potential importance is more as a measurement of bullish composure than it is an actual trendline traders are following.  No shortage of action around 530 either, so when the mega-macro trendline inevitably floats over the 520s, there remains a 525-530 action area, which again may only be more of a composure indicator, considering that during the previous downtrend, there was a gut-churning series of 20-points-plus intraday range days.

Now let’s have a look at…some levels to the downside which might be significant, using only the current uptrend as a reference to keep things simpler.

Starting at the “top”, with AAPL having closed at 502.33, below 500 is 498-ish as recent micro support.  The SMA-50 weekly (non-div-adjusted) stands at around 497, so maybe that can be combined with the 498ish level to make a 497-ish to 498-ish level.  493-ish held as support multiple times on Aug. 14 and Aug. 15 (interestingly, during early trading on both days).  485-ish, that horrible point of “catastrophic” resistance from months ago, gave a slight scare not long after the Icahn news hit by asserting itself as resistance once again around 2:30PM EST on Aug. 13, but it soon became transient support and then a launching pad over the 485 airspace barrier, with AAPL not looking back since.

In my uneducated opinion, there’s at least two points from which to measure parts of the “master” uptrend from 388ish-502ish.  The “point of almost no return” in the descending channel that ended on the Aug. 9 market close (453.65), and the higher low price achieved two trading days later, before AAPL renewed its uptrend and later fired up the nitro boosters (468.05).  As I understand it, the 38.2% Fibonacci retracement level is one that, if held, signifies that an uptrend is still robust (with the 61.8% retracement level being more of a “holding where it has to in order to continue the uptrend” situation).  The 23.6% retracement level shows strong bullish character.

Applying the 23.6% and 38.2% retracements to the two uptrends-within-an-uptrend, we get:

453.65-502.33 mini-uptrend:  490.84 and 483.73 (respectively)

468.05-502.33 mini-uptrend:  494.23 and 489.23; 61.8% retrace level:  481.14

(Notice the confluence of the Fibonacci levels with 493-ish and 485-ish.  And within the Fib levels themselves.  Might it be useful to combine them into zones, such as 493ish-494ish, 489ish-490ish and 483-ish-485-ish?)

Another potential “sub-uptrend” reference is the low point of AAPL’s post-earnings gap, 434.34.  Calculate the Fibonacci levels (of which there are multiple free online tools for) and you get:  486.28 and 476.36.  Given that 486.28 is another level quite close to an existing price band of interest, why not combine it to get 483-ish to 486-ish?  476 also has some confluence, being close to the brief, gently rising price consolidation that occurred before the tweet from Carl Icahn.  So, why not add another action zone of 473-ish to 476-ish?

To summarize, a “few” levels to the downside I’m looking at (yours will likely vary) are:

500 >> 497ish-498ish >> 493ish-494ish >> 489ish-490ish >> 483ish-485ish (where the EMA-8 is currently within) >> 481ish >> 473ish-476ish.

Isn’t all this overcomplicating things?  Possibly.  Aren’t these levels bunched close together?  Indeed they are.  “Why shouldn’t I just track in $5 increments, then?”  Sure, I guess you could!  Have I missed some other levels?  I’m sure I did!  I’m just looking for points of reference with more recent relevance, however close they may be, to see how AAPL handles them in the event of retrace, provided composure can even be measured at any of those levels (as you know, stocks can create gaps or simply cut through levels as if they weren’t there).

Finally, a quick look at trendlines, which once “established” are excellent for keeping track of a particular stock’s momentum.  The “base” upper price channel trendline, from which AAPL broke out of on Aug. 13, will be about 481 on Monday and around 490 by the end of next week’s trading.  The accelerated trendline I was tracking, which AAPL is also trading over, will be around 487 on Monday and 498 on Friday.

When to sel – er, TRADE is one of the most personal, complicated decisions any market participant can make – even for active traders who make dozens or hundreds or more trades every month.  But measuring composure whenever possible is always useful in my humble opinion, provided you have the time, patience, and/or trading timeframe for it.  Knowing where AAPL’s been and areas to measure composure should AAPL fall back to them might just help you make more informed decisions on when to…uh…trim and trail…lighten up on risk…raise cash…lower exposure…reduce account beta… ***

***Obviously, you can do the same on the way up to lock in gains, no retrace required.

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