Look at AAPL's 31% correction and why it won't go over 122

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Apple's highest close was back on February 23rd of this year when it finished the day at $133. Since that time it has only gone over 133 on 3 occasions and has reached as high as 134.54 on April 28th.

I wanted to point out that all remarkable investments have major declines and are a lot more volatile than Wall Street likes to point out. The stock market has had only a 12.3% correction so far this year as measured by the S&P500             from its highest close to its lowest close (intraday that correction was more than 14.7%). Meanwhile, AAPL             fell 22.5% (highest close to lowest close) and fell 31.5% from high to low. Both stats are double the S&P500             .

It is quite remarkable that a company like AAPL             with so many buy recommendations and happy customers who love and upgrade their phones and with so much cash on the balance sheet and low P/E multiples can be so volatile. AAPL             is twice as volatile as the market using this simple approach and you should expect this kind of volatility to continue because that's how it has always been. It is wise to look at the facts and then make rational expectations as to what you will see in your investment returns.

Volatility is the least important factor for deciding what investment to buy and hold because volatility is a function of investors reaction to news. Volatility is also a function of the company's ability to keep shareholders and the general public up to date on what is going on at the company, but it says very little about the company itself. If you avoid holding or buying stocks because they are volatile, then you might be missing out on compounding your wealth over the long haul.

I am showing here how AAPL             used to have buyers at the 120-122 level from back in February until August. When there are a lot of buyers at a certain price level, this is represented by the fact that almost no volume trades at that level. You can see this clearly in the chart of volume on the right. It is a histogram of volume displayed across the daily range of trading each day and summarized. The important points to look at are where there is almost no volume and where there is high volume . The low volume levels are more important because they represent "HIDDEN" resistance or support.

The tracks of major institutional buyers and sellers are shown simply by the areas on the chart where almost no stock trades. With this point in mind, AAPL             will have a very difficult time getting over the 120-122 level where buyers used to be and we can and should surmise that they are now sellers at this level. If 122 is breached and sustained, then we could conclude that the buyers are back and then assume that the fundamentals have caught back up and are justifying valuations.

What is my point? Know what to expect and plan for volatility and know what the stock chart is telling you. The stock chart clearly shows you important levels by the nature of what happens and what doesn't happen (trades don't happen at "one-side" levels in the market). Use these levels as trade entry points and you can keep your risk to a minimum and take advantage of the volatility . Stocks are just voting machines in the short term, run by the hopes and fears of varying investors and traders knowledge and has almost nothing to do with what is going on at the company.

Let's all work together here at TradingView to find KEY LEVELS to buy and sell to keep our risk as low as possible.


AAPL             119.50 last - Nov 1, 2015 Target 116, then 111, then 104 where I want to get long. Short entry levels: 120.5 - 121 - 121.30 stop 124, 125, 126.
Comment: Not stopped out at 124 - AAPL is not reacting to 122 and is holding above 122. If the price can't begin to move down on Monday or Tuesday next week, I will pull my "short-side" trading recommendation at this time as we move into the holiday selling season.
Comment: Excellent GAP DOWN this week on Credit Suisse's downgrade of AAPL due to inventory buildup and order slowing. I have to surmise that this is the typical pre-holiday inventory build and partly a lack of growth in iPhone6 sales. Either way, AAPL pulled back down to the last KEY EARNINGS LEVEL at 116.5 and we are seeing support come in at that level. If you are short and anxious to book profits, this is the place to do that. We can see how the stock lifts from this important support level to gauge how well the stock is being supported. Apple's new iPad Pro accepts orders online today (Wed 11/11) and tomorrow they could announce a strong order flow and could lift the shares. Either way, the drop from 122 to nearly 115 is a success so far.
Comment: AAPL dropping on forecasts for iPhone sales to drop year-over-year, a major shift in market expectations. Reductions in price targets and sales are coming from major brokerage firms. $110 reached. $108 was a key support level in the last selloff.
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Thank you Tim for sharing. I learned a lot from the pro. It really benefit me greatly.
Well done Tim....top notch work. Greatly appreciated !!!
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I want to add my two cents to clarify what you are saying here for the benefit of others.

3rd paragraph - Apple stock has a lot of volatility because it is a popular stock and is traded frequently by VERY LARGE number of traders, funds, advisors etc. Especially the options. They are all using Apple stock to generate income, and to be able to generate income it must have a price range that it trades across. This has nothing to do with the quality of the company' products, the stock is simply an instrument to trade across price arbitrage levels to make profits.

4th parag - I would joke that buy & hold is dead, and most visitors to tradingview are active shorter term traders, not buy & hold & grow old.

5th parag - I think what you meant to say is that as price fell down into the $122 - 120 range, buyers came in to buy it back up and support it. That is why the volume profile histogram shows very little volume in that range. As price moved up from below $120 it moved up past $120 very fast so there was not a lot of volume transacted at that price level. Then everytime it came back down into it, buyers bought it again to supprot it. Now your point of institutions buying it heavy at $120, that is the buy & hold crowd. So yes if they bought $5 million worth of stocks at that level and are intending to hold it for a long time, then when price comes down and threatens their investment, it is fairly easy for them to spend a couple thousand to buy the stock and push it back up to provide support. They can sell the small amount of band-aid shares they bought for support, after price has moved back up, while still holding the majority of their stocks for later.

6th parag - Your theory of resistance at $120 - 122 is good, but you do need to keep in mind that Apple has seen major distribution (selling from professionals to retail and smaller fund buyers) for the past 3 months, as it became evident that price was not continuing upward after July. I do believe I recall you had a note about this previously. Therefore, we might assume that the majority or professional and institutional long term holders have sold at the top where we see the heavy volume in the profile. If there is resistance and supply to be sold off as price returns to $120-122, it will probably just be nervous hands who were stuck holding the bag after August 24th. We are moving into the holiday "buying" season, the Santa Rally, so we should expect some bullish buying into the close of the year, HOWEVER, we are currently very overbought, and the professionals will need to push price lower, so they can accumulate a large inventory of shares, then they advertise lower prices for the stock, to get retail buyers thirsty to buy more at this lower discounted price, before the real santa rally starts in mid December, at which time they wwill start selling to retail as price moves up, and they keep the profits.

It is a wise trader who keeps in mind that the professionals are contrary to what the public sees happening in the daily markets. Meaning, if the stock is going up in price, it is because the professionals who bought it at the low price during the crash and selling it to retail. This is often referred to as a buying climax.

I hope these extra notes helps others get a better understanding of the market operations. Cheers!
B120626 B120626
Oct 27th saw a pullback to get price lower, to encourage buyers to step in and buy the dip.
I always like to read what Tim has to say and also wanted to thank you for taking the time to detail your thoughts. Very interesting.
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timwest B120626
Thanks for your comments and extra explanations to clarify my points. Well done.
Thanx for the update
Another good study Tim thanks again.
I have a similar view to this on the SPX as a whole - your thoughts would be greatly appreciated.
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