Two Apple Charts: After Earnings Day, Where Can Price Bounce?

Trading On The Mark
  JAN 25, 2013 10:50 AM

And where must it find support? A technical analysis.


We have been watching Apple (NASDAQ:AAPL) closely in recent weeks. In the wake of the company's strong reaction to Wednesday’s earnings report, here are some signals and areas to watch as support and, if there's a bounce, as overhead resistance.
Our working Elliott wave count has had AAPL tracing out a 4th wave, or perhaps the first part of a 4th wave. However, price has recently poked below the channel boundary on a monthly timeframe, as shown in the first chart, and it has moved below the initial support range of 463-473 that we had identified. Probing beyond that area makes it more likely that price will test the lower support marked by another channel on a weekly timeframe, as shown in the second chart.

On the weekly chart below, the large, red fork/channel shows the next area where AAPL may try to find support. Currently, the lower boundary is near 445. If the red channel fails to hold, then we should consider that we may be seeing something other than an Elliott 4th wave developing. In that case, it would become necessary to consider whether what we have labeled as the top of wave 3 may actually have been the top of wave 5.
If the red channel fails, then the steeper channel shown in blue may come into play. Currently, the lower boundary of the blue channel is near 405.

If a bounce materializes from around the red channel boundary or higher, then watch price behavior if it approaches the upper edge of the blue channel (near 513 for the week of January 28). If that boundary is exceeded to the upside, then we need to assume the stock’s decline is over for now and that it is in the process of tracing a middle part of the fourth wave correction, or potentially the first part of a fifth wave upward.

See more from Minyanville:

Apple: It's Not About Earnings

Stock Downgrades:Saying Goodbye to Goldman
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