AAPLTalk Weekend (10/11/13 Market Close): Reasons for Optimism Amidst Uncertainty, Subject to a Bunch of Ifs

(Reminder: Click on charts for the full version, they’re much bigger than the thumbnails.)

Some things never change.

Never-ending political bickering.

Eternal fear, uncertainty, doubt and dismissal of a certain “boutique” consumer electronics firm headquartered in Cupertino, California.

And lately, one wonders if “AAPL trading well below the S&P market multiple for as long as it remains a publicly-traded company” should be added to that list of “truisms”.

But are there reasons for optimism within the AAPL chart as the markets potentially contend with two weeks (and counting) of the US Government Hoedown?  Granted, it’s particularly “risky” to read into things too much right before the weekend, even as the latest reports carry somewhat hopeful tones of compromise (EDIT:  or not…) – but let’s see if the charts have any fragments of potential clues (add various asterisks and additional disclaimers here).

Daily chart:

aapl-daily-101113close

– Well what have we here?!

– You’ll recall our “old friend” the top trendline of the parallel descending channel (you can refer to posts from, say, 2-3 weeks back if you care for a refresher, you don’t really need it though).  The parallel white line was the approximate “mid-channel” point of the original channel; the lower bright green trendline was removed because of the length of the consolidation – it’s lost relevance in my humble opinion.

– You’ll also recall the parallel descending channel of lesser slope (therefore, more bullish/theoretically more difficult to maintain), as marked by the light blue trendlines.  I’ve been tracking that channel more recently.

– Focus more on the descending channels than the seven-day “air pocket” trade after iPhone 5S Disappointment Day in mid-September-ish, and you see some very constructive price action, in my humble opinion.  Granted, there isn’t a confirmed breakout based on either the “old” green or “newer” blue trend lines, but this multi-week consolidation (air pocket excepted) is encouraging for bulls in more than a few ways:

– As far as the green trendline is concerned, there’s early breakout signs.  Oct. 7 was a “breakout failure” day and nasty inverted hammer candle to boot, which brought a fairly scary bearish engulfing candle the next day.  But AAPL “held where it had to” with an impressive hammer candle on October 9 (the intraday low didn’t breach the white “mid-channel” line), broke out slightly and held on Oct. 10, and then gained a few points of separation with a bullish engulfing candle from the green trendline this Friday.

– There’s also a case to be made for a wedge-type consolidation breakout.  Notice the gold line that trendlined a decent amount of the lower-bound price action starting in late August and also late September/early October, and also the red upper descending “trendline”.  While AAPL suffered breakout failures from this wedge-type pattern on Oct. 5 and Oct. 8, the wedge resolved to the upside on Oct. 9 and the resolution remains positive as of end of week.

– Again, this depends on your view of the air pocket interval.  But even then, the air pocket itself may form the basis of yet another bullish hypothesis – as the “head” element of a multi-week “disconnected” inverted head and shoulders reversal setup.  Granted, measured moves are theoretical, but this one measures over 40 points. And the formation looks quite textbook.

– We’re actually not done yet with potential positives, if you can believe it.  Oct. 11 brought fairly convincing evidence of something we haven’t seen in a while, albeit on a more micro basis – a higher high closing price (which, of course, dovetails with an inverted head and shoulders-type scenario).

– AAPL is trading above all of the daily moving averages, having tested the EMA-8 earlier in the day and bouncing above after a brief break below.

– While the air pocket can’t and shouldn’t be dismissed, current metrics including the MACD-h and Williams oscillator are showing AAPL hanging in there quite nicely at an opportune time, with the closing price a safe distance above the 23.8% retrace of the intermediate uptrend (388-513ish).  As far as multi-week consolidation periods go, that doesn’t seem that bad at all.

– Always prudent to temper my tabloid instantaneous chart reads with some caution, so it’s worth pointing out the relatively lethargic (10M-ish and under) daily volume lately, and also that AAPL must eventually accomplish a breakout with authority from the most aggressive descending channel/bull flag formation to deliver on its bullish potential.  And that would be the top light blue trendline, which looks to be at around 497 by next Friday.  And since that’s a descending channel, even a “conservative” bullish case should see AAPL making new intermediate trend highs not long after the breakout – which is to say, over 513.

Wrapping up with the weekly chart for a change of pace:

aapl-weekly-101113close

– Overall, the intermediate uptrend is still holding up pretty well, with MACD-h remaining positive since around the beginning of May, and the Williams oscillator rating about to flip to “overbought”/strongly bullish at a seemingly opportune time.  The somewhat worrisome green candle from last week led to a much more reassuring green candle this week, closing near the top of the intra-week range.  It’d be “nice” if AAPL resumed its price recovery at a rate more like the cascade from 705, but hey, bulls can’t have everything.  The week-end read on this timeframe remains pretty solid.

The problem with technicals is that they forever look backward, and the way forward for the markets remains more than a little murky.  The debt ceiling deadline hovers just a few days away (Oct. 17), with no clear resolution in sight.  All that considered, just focusing on AAPL’s price action – so far, so constructive at least.  A ton of ifs, but if AAPL can “just hold on”, the case for a bull flag/reversal set-up still has some real substance (in my humble opinion, anyway).

See you on the trading floor next week.

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