After its notable rally off the late June lows, Apple (NASDAQ: AAPL) began to top out in the second half of September. After trading sideways to slightly lower for a couple of weeks, the stock gapped down 5.6% on the morning of Sept. 11, the day after it announced of a fresh batch of iPhones.
Furthermore, with the company’s next earnings announcement scheduled for Oct. 24, traders have a few weeks to potentially play the stock from the long side without any news to shake things up. Personally, I have found great success swing trading AAPL, as it seems to respect technical patterns particularly well in two-to-three-week time frames.
Additionally, given the strong emotional attachment many investors have to their positions, the stock often displays basic trend breaks and candlestick signals that offer great trade setups.
Looking at the long-term chart, we see the stock began its astonishing multi-year climb in 2009, breaking above the 200-week moving average (lower blue line). The sell-off into April 2013 can still be looked at as merely a much-needed mean reversion move.
Of course, investors who bought the stock above the $600 mark may not find much solace in that statement. But the fact remains that AAPL, with its apparent double-bottom in April and June, bounced to exactly the level it should have, namely the 200-week moving average.
As further proof of how well the stock often reacts to straightforward technical analysis, notice how the rally off the double-bottom moved it into a resistance area made up of its 100-week simple moving average (upper blue line) and the underbelly of the 2009 uptrend (straight diagonal line). AAPL moved into this resistance area and eventually rejected it just as it announced its new iPhone 5C and 5S, as well as the new iOS 7.
Each stock respects different moving averages, and for the past two years or so, AAPL has respected its 100-day simple moving average better than any other moving average in the daily time frame. After bumping into it on Sept. 16, which at the time also coincided with a 50% retracement of the rally off the June lows, the stock bounced the following day with follow-through buying on Sept. 18.
On Friday, Sept. 20, AAPL left a somewhat concerning outside day candlestick behind on its daily chart, which is why I wanted to wait for Friday’s high to again be reached to fill the downside gap from Sept. 11 before entering a long-side trade. This happened on Monday on positive news regarding iPhone sales, and it is now time to get long AAPL.
– Set stop-loss at $482.20
– Set initial price target at $520 for a potential 6% gain in 2-4 weeks