Two Signs That Apple Is Bottoming

By MoneyShow.com  MAY 31, 2013 11:34 AM

This tech giant has been in a steady downtrend since its September peak just north of $700, and there are signs that it might finally be ready to bounce back.

 


The stock market put in a good performance on Thursday with small caps, banks, and semiconductors doing the best. The market internals were also positive and this has kept the daily technical studies within their recent trading ranges.

Disappointing data from the eurozone has pushed their markets lower early Friday with losses across the board. The S&P futures are also down in early trading and a weekly close in the June contract below 1632.75 on Friday would be a short-term negative. The key level for the Spyder Trust (NYSEARCA:SPY) is at $163.94.

Of course, one stock that has been much weaker than the market over the past six months is Apple (NASDAQ:AAPL) as it is down 23.4% versus a 16.8% gain in the S&P 500 (INDEXSP:.INX). There is an Apple developers meeting on June 11 but as candlestick and pivot expert John Person pointed out, the stock could trigger a monthly HCD today. This is one of the two signs that Apple may finally be bottoming.
 

Click to enlarge

Chart Analysis: The monthly chart of Apple shows that in addition to the weekly LCD that formed at the September highs, a monthly LCD was triggered at the end of October (see arrow).
The daily chart of Apple appears to be forming a reverse head-and-shoulders bottom formation.

What It Means: The bullish sentiment for Apple has certainly taken a big hit in 2013 as it is not uncommon now for analysts to speculate that it will never again be a market leader. Anyone who voiced such an opinion a year ago was guaranteed to get a flood of angry emails.

The combination of a monthly HCD and the completion of the reverse H&S bottom will project that APPL could reach the $550 level in 2013. A two-stage buying process is advised.

How to Profit: For Apple, one idea is to go 50% long at $449.50 or better with a stop at $414.66. I would add a 50% long position on a daily close above $466 with a stop at $428.80.

Editor's Note: This article was written by Tom Aspray of MoneyShow.

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No positions in stocks mentioned.

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