Apple Inc AAPL forming a trend reversal pattern

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The rally from 570 to 700 on this 130 minute bar chart (which makes a trading day subdivide into 3 bars) shows how the volume is weakening on each advance, which suggests the trend is weakening.

The regression channel has been violated and there is still a chance for a lift back into the yellow circle "entry" zone and as the market discounts the next earnings report, there could be some nervousness and selling before a solid earnings report is announced.

For now, however, I will look for shorting opportunities in AAPL             .

Best regards,

Technical Tim
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Tim, thank you very much for sharing this. What is your opinion regarding long term (12-18 months) AAPL opportunities? It would be fantastic if you can publish an idea on this. Thanks.
timwest PRO charttrader
I'll see what I can do. I can analyze a weekly chart and see what I can find. I would personally sell leaps on AAPL at the money. I would also sell leap puts down at 550 (12 months out). I am not a bull on AAPL from these prices. But I also don't see the stock crashing. One question for you: Do you already have a position in AAPL?
Yes i do and this is the main reason of my question:) I bought equal amount of AAPL and NOK about 2 weeks ago. I'm considering as long term investments and it would be great to find more opinions about these stocks. I know that you would recommend to buy WMT instead but anyway:)
timwest PRO charttrader
Well, NOK has dubious finances and burns through cash and has a large debt load. I wouldn't consider NOK a viable "long term investment" due to its poor financial condition, but rather a viable, volatile short term trading candidate. I like AXP long term. I like JNJ long term. I had liked WMT at lower levels (near 50) but still like it up here (over 70). I like ABT long term. I believe that AAPL will be at these levels for many years, perhaps 10 or more. This position that AAPL is in now is the equivalent of MSFT in 1999, in my opinion. It is also like KO, PEP and others in 1997-1998 when they peaked. There is too much focus on the stock and the nearly $700 billion market cap is a problem because in order to earn a 10% return on it you have to earn $70 billion dollars. It is no easy feat to earn $70 billion a year, even if you are in the oil business. If you owned AAPL outright, you'd want to earn 20% return on your money or more but I seriously doubt that you could pull $140 billion from the world every year in PROFIT. It is delusional to think that is possible. But try anyway and see what it means in terms of profit per person. It means if 50% of their profits came from the US every year, then 300 million people would have to send AAPL $70,000 million a year which is $230 per year. Every person in the US would have to hand them $230. That's a bit crazy, wouldn't you say? It is very crazy. If AAPL holds onto half this market cap in 15 years it would be a miracle. GOOG on the other hand, has the chance to increase in value relative to AAPL because they are so diversified and can make money from myriads of channels from myriads of sellers selling to myriads of buyers across the world. In the long, long run, I believe in GOOG more than I believe in AAPL, based on the awkward starting point of valuation that AAPL has now. How is that for a quick answer :-) Cheers and good fortune to you. You've helped me crystallize my thinking. Tim
Tim, thank you very much for detailed feedback. I really appreciate it as always. This sounds absolutely reasonable especially regarding Apple. But to be frankly i heard the same opinion when it was 300 and then 400:) Unfortunatelly for me your short prediction works perfectly at this moment, very impressive:) As to the NOK, do you think that it can go further down? I had an impression that the company was planning to leave Finland and move to another country to get acquired by another company, such as Microsoft...
charttrader PRO charttrader
I believe that Lumia 920 will sell far more copies than Lumia 900 and this one will mark Nokia's turnaround. If not, then Nokia's hope will be a takeover from Microsoft.
AAPL is now right at the level of the "GOOD ENTRY" - but not quite at the time of the circle. Either way, this is close enough for me.
This is possibly at a short term bottom right here... be ready for a bounce and then get back on it again. I want to be out of this trade before earnings later this month.
AAPL reached the top of the target box... exit shorts.
admin PRO timwest
Thanks!! :-)
Good Job Tim :)
Thanks Algo kid!
perfect :D
Thanks mohora :)
super trade Tim !
Well - now that AAPL has fallen nearly identically to the chart listed above... We have to ask ourselves if this is the END or just a time to stop and reflect. The trendline is breaking going back a long time on the daily chart and this pattern oddly mimics the 1987 stock market action just prior to the crash (which we are celebrating today, just 25 years ago today). If we have daily data on the S&P500 I can show you how this pattern is nearly identical to the pre-crash action back then.
oops PRO timwest
I am also bearish and short (on the indices) which I displayed on my S&P vs VIX chart earlier given the obvious rising wedge pattern .

Maybe the market looks toppish, but we should not forget we have quite a different fundamental environment.
* Let's start with the big rallies = 2009-2012 +111% vs 1984-1987 +151% (and actually 1982-1987 even +250% !)
* 10y yield currently (due to the FED artificially low) at 1.8%, in 1987 it was 7% (and coming sharply lower since 1981 at 15%)
* S&P500 dividend yield currently say 2%, 1987 it was 3% (coming from 6% in 1981)...
So in this respect 10y and S&P dividend yield is say roughly both 2%, in 1987 yields were much cheaper vs S&P dividend yield
* Inflation now and then is roughly the same around 2% (but coming down sharply from 1980 at 14%)

So if the technical picture is maybe similar given ever narrower rising wedge and negative divergence (accompanied with a very cheap and low VIX), let's see how the market will do in the next days.
Back in 1987 the market actually topped out on 25th Aug, went lower until end Sep, retraced a little until 2nd Oct. Then it just gradually weakened a few days. On Oct 15th market already got hammered down 4%, and the next day Oct 16th another 8%. Over the weekend - I think it was G7 - decided to weaken the US$ and on Monday markets crashed 22% given the then unexpected program trading selling spree. .... and as we now know recovered all of this 41% (25Aug-20Oct) in the next few weeks and started a humoungous rally. (looking on long term charts now the 1987 crash was just a blip haha)

So, it didn't really happened overnight, the market topped out end of Aug and after weakening 7 weeks it started with a 2 days market shake up , followed by that market earthquake the black Monday.

But nevertheless, the other parameters and environment are quite different. Bonds are actually much more expensive right now than stocks. I expect a correction, not a market crash.

Tim, can you explain, which pattern do you find almost identical ?
best wishes,

(by the way, I started my banking traineeship in Aug1987 and was in the equity trading department in Oct , helping out filing orders after hours in that mess.) I still have the daily newspapers from then ! LOL
Hello chartbuzz. I didn't notice your comment from 3-months ago! Sorry I didn't see what a nice commentary you made here. Perhaps tradingview can improve the system so that it isn't so easy to miss comments, especially as thorough as you have made here.

As for technical similarities of AAPL and the stock market in 1987, it was simply the patterning of the price action. If I could draw out the pattern from the S&P500 in 1987 it would be like this:
1. A large rally, followed by sideways basing action over a wide range.
2. A rally out of that consolidation followed by another, much smaller, much less time correction.
3. A last rally out of that consolidation that ends at the same price distance as seen in #1 added to the consolidation area.
Accompanying the rally is what seems to be a widespread belief that we are in a new age with plenty of excitement and plenty of money being made. That was the 1987 environment.

I was investing in that time frame and I was also a student of economics and a world traveler from 1985. There were many factors at that time that are worth detailing in a chart to show everyone here what was really going on under the surface and going on in related markets. Most people gloss over inflation rates that were rising dramatically. Treasury bonds were getting crushed along with the US Dollar. Gold was moving up strongly as was the price of crude oil. Trade tensions were mounting. Japan was buying up the world, literally with their extremely low interest rate environment. Real estate taxation had just shifted and that would change the flow of funds into the banking system for years to come. This was extremely important to the course of the markets, in my opinion. 1986 saw a disruption of the trend of buying real estate that generated a cash-flow loss because those losses were no longer available to use against ordinary income. Instantly, the market for real estate started to crater, and later to collapse leading to the S&L bailout in 1988 to 1990. The capital gains tax rates were going up from 20% to 28% and it was only a question of "when do you sell to lock in these crazy gains in stocks?" Sell in 1987 to lock in the lowest rates or wait until 1988 and get much higher rates. Well, Government Bonds jumped up to 10% and provided all the incentive to bail out of stocks and to switch into bonds. The dollar decline, changes in tax policies in stocks and real estate, high inflation rates only seemed to make it obvious that it wasn't worth the risk of owning stocks. The clamp down was in place to shut down the speculation. Greenspan stepped in in August 1987 and made the world wonder what he would do given his published views supporting gold and reducing leverage in the banking system. It was a perfect storm, but it was solidly in place and destined to happen. The speed and severity of the decline, 2722 to 1700 on the cash DJIA was a sharp drop from August 25'ths peak to October 19th's low. Less than 2 months wiped out over 1000 points or 40% of the market cap.

I'll come back to this tomorrow. All the best, Tim 12:12AM EST Tuesday, Feb 12, 2013
Very impressive Tim
timwest PRO jmtbernardo
Thanks ptbernardo. I appreciate the comments.
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