Is Apple bottoming?

Yesterday I wrote that Apple (AAPL) might be bottoming and setting up to complete the right shoulder of a head and shoulders top.  If true, then the stock should be bottoming at the neckline, which should be around $530 (the May low).

How do we know that the stock has bottomed: can we infer this from a string of down days and then a single up day? Well, let’s look at the May 2012 bottom (see chart below).

Image
In May the stock saw a string of five down days that saw the stock fall from ~$560 to ~$530 (~5%).  This was followed by a single-day reversal that recovered the previous 5 days’ losses (i.e., the stock went from $530 back to $560).  The stock then held above this support line at $560 for a further four days before moving higher.

Fast forward to this week.  We have seen three days of declines from ~$590 to ~$540 (~8%), which is a more violent decline than we saw in May.  Today we are seeing gains of ~3% (it is 1pm EST right now) but the stock is only at $553; a long way from recovering recent losses.  If the May pattern is repeated the stock will close down (below yesterday’s close of $537), but near the bottom (a buy signal for Monday).  If the stock closes up then we should wait to see if support forms over the next couple of days before buying.

UPDATE

Writing today, 13th November, the stock does appear to be bottoming.  Since it’s 4% fall from $560.63 to $537.75 on 8th November the stock has been stabilizing (see chart below).

The daily lows for the last four days were:

  • 8th November $535.29
  • 9th November $533.72
  • 12th November $538.65
  • 13th November $536.36

The support that we were looking for seems to be forming at $533-$538.

UPDATE

Writing today, 1st April 2013, Apple has continued to fall reaching $428 today.  Clearly my prediction did not come true this time.

Screen Shot 2013-04-01 at 11.33.08 PM

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