AAPLTalk Pre-Market Edition (4/7/14 Market Close): Fool’s Gold for Bulls?

Two potentially bullish signs in recent days.

1) Textbook hammer candle and breakout from multi-week consolidation-type price action, showing momentum from a volatility compression phase and breaking through a threshold controlling downtrend line. (I know, I know, no way would I say that ten times at any speed. :P)

2) Incredibly compressed price action on the micro-timeframe hourly chart, and a textbook resolution to the upside.

And then…?  None of the follow-through you might expect from those optimistic types of signals.

Worse yet (for bulls, anyway): AAPL proceeded to break below two controlling downtrend lines, and a potentially instructive multi-month trendline didn’t hold today.

But it’s generally better to show than tell, right? So let’s look at the charts.

Hourly chart:

aapl-hourly-040714close

– Ouch. A micro bear flag trigger that, at first glance, appears to have overshot the theoretical measured move (around $12 or so) by several points.

– Last Friday, AAPL sliced through the intermediate light green downtrend line. Today, AAPL quickly fell below the dark blue downtrend line, which it had held above for ten trading sessions. Not to mention the purple trendline, which I believe has multi-month significance. So, yep, looks like a breakout failure by at least one measure.  AAPL tried to bounce in the final hour, but the attempt was mostly unsuccessful.

– You’ll notice, along with the been-negative-for-some-hours-now MACD-h, an interesting repeating pattern of peaks and valleys in the Williams/Stochastics oscillators on this timeframe, starting from around March 13. As if that near-linear drop into the lower 520s wasn’t clear enough, AAPL has been “oversold” for longer than any of the last three “cycles”.  Repeating the obvious given the clear selloff, yes, but it’s another angle to consider, and a bearish one at that.

– About that failed bounce final candle on the hourly chart – it is an inverted hammer candle, but like all potential “early warning candles”, we’ll need more time to see if it’s the sign of a reversal in the current micro downtrend.

Daily chart:

aapl-daily-040714close

– Three-day bounce; ran out of steam; three-day drop. Not exactly inspiring price action.

– Other bearish “highlights” – a new lower low, which we haven’t seen in this uptrend from Feb. 3 (on the daily chart); falling below all the tightly-bunched moving averages I track except the SMA-200 (dashed red line); MACD-h crossing over into negative territory (which it did on Friday on this non-div-adjusted chart, but -0.01 isn’t exactly “definitively negative”); AAPL going from breaking above the upper Bollinger band to threatening a break below the lower Bollinger band in the span of ten sessions.

– Since technicals are always mixed bags of various weightings (as far as I know, anyway), there’s at least two potential silver linings. First, volume’s starting to pick up again, though there’s no reversal signal I can see on this timeframe. Second, AAPL is reading oversold on the Williams oscillator – though of course, a stock can remain oversold for an extended period of time. Just look at AMZN’s daily chart for a current example.

To be clear, the whole “charts and technicals can only ever really look backward” thing aside (to say nothing of intervening market news, events, and myriad other market-influencing externalities), I’m not predicting “doom” for AAPL. The intermediate trend/countertrend from the 380s remains very much intact, and AAPL is still above the 38.2% retracement level. AAPL has outperformed the NASDAQ over the past month. And very early pre-market activity actually has AAPL up a point or so.

But the recent price action speaks for itself. AAPL had two very good opportunities to deliver on its bullish promise, and it simply did not. If nothing else, caution is definitely warranted.

Best of luck with your Tuesday trading.

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