Apple’s (AAPL) Remarkable Recovery

If you recently got disgusted and vowed never to look at a chart of Apple inc (AAPL) again, you missed a major move and locked yourself out of a valuable lesson.  Let’s take a look at what’s happened since Apple’s ‘disgusting’ price action after their earnings report and where we stand now.

Apple Daily (AAPL):

AAPL daily stock market chart" src="http://blog.afraidtotrade.com/wp-content/uploads/081308-1612-triangle11.png" alt="" width="489" height="421" />

After Apple’s late July earnings debacle (amazing earnings but reduced guidance), price continued its downtrend and added even more pain to investors who hoped the earnings day would be the price bottom - as for now, it was indeed the bottom, but traders had to be very aggressive and nimble to enter at those prices.

Interestingly enough, Adam Hewison (Market Club) posted a video that day which provided a great educational lesson that taught when it was ‘ok to trade against the trend” and vowed that Apple at those low prices (around $150 per share) was a time that it was not only safe to do so, but encouraged.  It’s a fascinating video entitled “Apple Rebound” which was released on July 22nd - Adam also discusses how to use Market Club technology to find opportunities like that and the video provides hands-on application of their software (consider joining Market Club if you have not done so - it continues to be an outstanding and extremely affordable service).

That being said, Apple officially broke a downward sloping trendline last week and price has surged higher without looking back - indeed investors are repricing what they thought about the earnings report and the future of the company going into the ‘back to school’ and upcoming holiday sales (hey, Christmas isn’t that far away!).

At the moment, we’re retesting July highs and if we can clearly exceed $180 per share, it would add tremendous fuel to the bullish fire.  Also, note that Apple has been up yesterday and today - two days when the broader market traded lower (which shows us relative strength - as of this writing, the NASDAQ has turned positive on the day).

Why might the $155 per share level been the bottom of the daily downtrend (so far)?  Let’s peek at the weekly structure.

Apple Weekly:

AAPL weekly stock market chart" src="http://blog.afraidtotrade.com/wp-content/uploads/081308-1612-triangle21.png" alt="" width="466" height="318" />

I had posted earlier about this development, in that Apple was testing the rising 50 week moving average and could find significant support at that level.  Indeed that happened, and with the exception of the appearance of the sudden intraday gap down (long lower shadow in mid-July), price never closed beneath this level, meaning a low-risk entry could have been taken at this zone with a stop around the $150 per share level.  As you see, this trade is currently profitable and appears to have some ‘room to run’ higher.

With strength in Apple, this could be a boost to the NASDAQ index and could absolutely be bullish (or at least stabalizing) news for the market.

Let’s continue to watch this amazing and resilient stock together.