Time to top up on Apple? Maybe not.

Apple (AAPL) has run up to over $700 in mid-September (on iPhone 5 release hype) and then fallen to under $600 today.  The stock is now toying with its 200d moving average of $590 (see below).  The 200d moving average is often a support level: if the price falls below $590 then it might keep falling for a while.  This could offer an excellent buying opportunity well below $590.

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Looking at the longer term chart (below) I see the left shoulder (early April) and head (mid-September) of a head and shoulders top pattern.  If the right shoulder forms then it will complete a bearish technical pattern.  More specifically, if we see a rally that peaks in about 3 months (late February or early March 2013) then the pattern is complete and we should expect a price collapse.  I’ll check back in on this prediction in February.  In the short term, a rally in the next 3 months would provide good returns and a possible buying opportunity.

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I took profits at $650 back in August.  The stock then ran up to over $700 and fell back down to its current $596.  My strategy of trading around core positions suggests that I should top up again at around $585, which is only 2% below the current price.  Normally I would place a limit order at $585 and wait for the stock to fall but, given that my target price is very close the 200d moving average, I will wait to see if the price falls through resistance to below $585.  Maybe I can get a bargain at around $575 if I’m nimble.

UPDATE

Writing today, 1st April 2013, this prediction did not come true.  Apple continues to fall reaching $428 today.  There was no head and shoulders.

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