It used to be that Apple Inc.
(NASDAQ:AAPL) moved the markets. Now the markets move despite it. Yesterday Apple stepped over the worried and lowered earnings bar and shares jumped as a result. In fact, the gap up yesterday finished off a confirmed bullish ABCD pattern that has been in play off the lows set back in late June (red lightning bars on the chart). Now that the pattern is complete, earnings are done and the stock has risen, what’s next? Well, in neoclassical technical analysis, lower price beckons.
Here’s a chart that explains it all on this time frame.
As one would have it, Apple’s lurch higher completed the ABCD projection and simultaneously tests the top of anchored resistance. Anchored resistance, in layman’s terms, is created as a result of known areas of supply and demand pressure that can be visualized on the charts. In this case, the bar from May 15 was a wide price spread and high volume bar. That makes it an anchor bar -- a bar where significance was demonstrated.
The gap up yesterday tested that significant bar and failed both on price and on volume. In other words, as prices pushed into a known area of supply, the buyers failed to show up and buy at higher and higher prices. Demand (volume yesterday) tells you that. Worse yet, rather than step up and buy more, they instead chose to sell at those higher prices (lower close than May 15). That’s supply and demand on the charts.
It’s a powerful tool.
On the longer term charts (weekly
charts), the gap up yesterday looks like a pimple on an elephant; it’s not even visible. On both the weekly and monthly time frames, Apple is testing anchored resistance and there’s no indication that it will be able to get over it yet.
At this juncture, Apple will most likely retreat to the first sign of demand again which happens to be the lows from yesterday’s gap up. That’s where the next test should occur and the market will reveal additional information about the ever-evolving supply and demand picture. If there is sufficient interest at that price point, then there could be another bounce and test of the resistance zone. If not, then the longer term trends will exert more downward pressure.
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