AAPLTalk, 10/17/13 Market Close: A ‘Good’ Kind of Overheated?

Just-for-fun trivia:  When was the last time AAPL had seven green days in a row?

Answer:  If I’m reading the charts right, late February 2012 – over a year and a half ago.  I’m not implying anything from this (at the moment), but it’s certainly interesting to see something so uncommon from AAPL, especially during the massive US gov’t shutdown/debt ceiling uncertainty that was only “resolved” last night.  AAPL didn’t always outperform the market, but neither the SPX nor NASDAQ can claim that winning streak in the same timeframe.

Let’s just get to the question on a lot of market participants’ minds, even AAPL bulls – is AAPL due for a down day soon?

No idea.  But to me, the more relevant question is – is AAPL’s current short-term rally sustainable?  Let’s see what hints the charts might have for us.

The hourly chart is still looking really good in my humble opinion:

aapl-hourly-101713close

– Day 3 of the descending channel breakout.  Note the small gap down to start the day, but AAPL didn’t look back, and it’s setting up a beautiful-looking intraday bull flag as a bonus.

– Interesting how there aren’t many red candles lately even on the hourly timeframe.

– Williams/RSI indicators still showing overbought, but they can also embed as bullish during times of sustained momentum.

– MACD-h isn’t moving much – in fact it closed very slightly negative.  Which actually isn’t a big surprise – AAPL’s up barely a dozen points (slightly over 2%) from last Friday’s close.  As bullish moves go, this is quite the gradual one.

– If this were a daily chart you might not notice anything all that “frothy” about AAPL’s price action.  Yes, hourly timeframe, but notice how AAPL is “following” the EMA-8 and the top border of the upper BB rather than skyrocketing off into Parabola World.

– Keep an eye on that volatility squeeze/”price decision gate”, by the way.  BB bandwidth is currently about 7.5 points.  And it doesn’t take an expert technical trader to tell you that AAPL is setting up very well for this situation.

Of course that’s just this timeframe.  Which is why I’ve been including at least two timeframes just in case as of late.

Now, the daily chart makes a “stronger case” for some kind of AAPL “rest stop” in the near term – but it also doesn’t.  I’ll explain what I think are the two prevailing micro-timeframe “arguments” after the chart.

aapl-daily-101713close

The More Cautious ViewYes, AAPL needs retrace or consolidation at this point, even if AAPL bulls will ultimately have their day in Pamplona this intermediate uptrend.

>>> “I mean hey, seven consecutive up days, not seen since February 2012.  That’s highly irregular price action, which is enough to warrant serious caution by itself.”

>>> “Williams/RSI are both signalling overbought in a big way.”

>>> “The Rally Rulebook says ‘breakout on volume’, and we’re seeing anything but that, with 5 out of the last 7 sessions having an anemic <10M share volume.”

>>> “AAPL’s starting to float over the EMA-8 and bump up against the upper BB.  This typically doesn’t end well for AAPL at least short-term lately.”

>>> “Even if we’re to believe AAPL is due for a big breakout, it’d look more sustainable with at least some mild retrace or sideways action.”

The More Bullish ViewNo, AAPL’s current course is quite sustainable, and about as “expected” as you can get given the multi-week technical setup and the multi-month timeframe context.

>>> “OK Mr. Rally-is-Doomed, I see your seven consecutive up days (more molehill than mountain climb), and I raise you FIVE consecutive DOWN MONTHS (check your local monthly chart).  AAPL isn’t anywhere close to retracing its losses from 705, so there’s hardly any equal-and-opposite reaction on the way up, much less some helium deal.”

>>> “You’ve got hyper-momo tech stock moves (such as TSLA, which is known to soar or tank several percent in a single day on a regular basis), and then you have AAPL’s bullish move doing its best tortoise impersonation by comparison.  If ever there was a way to sustainably string together winning sessions, this is it.”

>>> “The price action doesn’t lie.  In the past seven sessions, you have:  Power hammer candle, semi-doubtful not-quite-a-hammer candle, bullish engulfing power candle, power candle, inverted-hammer-esque candle, doji candle, power candle.  Two takeaways from this (at least).  First, it’s not like AAPL hasn’t been tested by the market, there’s been at least three sessions of uncertainty.  Second and more importantly, AAPL has resolved these short-term ‘market doubts’ with decisive moves, modest though they may be (which goes back to the measured, gradual move higher vs. something overheated).”

>>> “AAPL is allowed to be a leading stock, you know.  Leading stocks can float above their EMA-8s and not only ride the upper BB, but also trade above them.”

>>> “Does anything in the MACD-h look all that frothy?  No?  Well maybe that’s because AAPL’s been in multi-week consolidation and only started a potential breakout on Tuesday.  And a breakout of a whole five points or so, mind you.”

>>> “AAPL has two ways to win, and in both cases the price action has been highly constructive.  See the descending channel as one example.  And if you don’t believe in that, check out the damn-near textbook inverted head and shoulders (which visualizes a bit better on a line chart than a candle chart).”

Well, maybe I’ve inadvertently hinted which argument I think is better. 😀

Not to say some retrace or sideways trading isn’t on the way – it wouldn’t surprise me given the New Three Trials of Sentiment around the corner.  There’s never anything wrong with a stock resting during a bullish move.  And hey, AAPL could always fall off a cliff again, it’s still far from a Wall Street darling.

But the instanteous read has looked better than it has in quite some time, and AAPL has remained intermediate-trend bullish ever since 388.  So maybe not 10 straight up days, but 9 out of 10? 😀

OpEx Fridays look to be interesting as they always are.  Best of luck on the trading floor tomorrow.

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