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MV Weather Report: Possible Blizzard Surrounding Apple


Rain or shine, we review the day's biggest stock stories.


There were Apples (AAPL) and Caterpillars (CAT) on Wall Street today as both companies reported very strong quarters.

This morning before the open, Caterpillar reported EPS $0.64 and revenues of $7.3 bln compared to estimates of $0.06 on revenues of $7.48 bln. CAT stock reacted by trading higher by 3.04% to $59.61, well off the day's high of $62.14

Last night, Apple reported EPS of $1.82 per share on revenues of $9.87 bln smashing estimates of $1.42/$9.87 bln. Today, Apple's stock traded higher by 4.69% to $198.76 , almost making a new all time high at 202.96 (Is that a double top on the five-year chart?).

Today on the Buzz and Banter, Professor Kevin Depew gave his thoughts on Apple.

"It took some time, but the euphoria over Apple earnings last night has carried over to today and we will likely see the stock print above 200 this morning. This would be important because it means a monthly TD Sequential sell signal that had been in deferral since June 2008 will now register.

"Wait, what is deferral? An important rule for TD Sequential involves the final bar in the 13 countdown. Once a setup records, (remember, TD setup is a pre-requisite for a potential TD Sequential countdown) and typically after a 1-4 bar correction, then countdown can begin.

"It might help to think of TD setup as the momentum phase and countdown as the trending phase. Setup requires consecutive bars, hence there is a momentum component, while countdown does not require consecutive bars, so in a sense it is counting the underlying trend that may be hidden from conventional views of price activity. This, as we will see, is the case with Apple on the monthly chart.

"A TD Sequential countdown compares the current close with the high two bars earlier for a sell countdown. After 12 bars where the close has been greater than the low two bars earlier, a 13, the final bar, can record, but there is an important distinction with the final bar of the countdown. It's high must exceed the close of bar 8. This helps ensure that exhaustion has truly been met.

"So, for Apple on the monthly chart, bar 12 was recorded in April of this year, but as you can see, that was well below bar 8's close of 198.08.

"Here is the chart as it appeared before today.


"Now that Apple has exceeded the 198.08 level, the 13 can potentially record. But we're not quite finished yet. The close this month remains important. For the 13 to record, we need the close this month to be greater than or equal to the high two bars earlier, which was 172.49.

"What does this mean? On a monthly basis, it means Apple has a high probability of trend exhaustion, while there also exists a floor of sorts at the 172.49 level. Something to think about if setting up a strategy based on this sell signal."

This is a potentially bearish set up Professor Depew mentioned on Apple. Plus, as I noted today on Ticker Talk, both Apple and Caterpillar recorded outside days down by opening higher and closing lower, a potentially bearish pattern.

Is Apple a good short? Is there any good news left in the stock?

Earnings season is full steam ahead, check out the Trading Radar for a list of the companies reporting earnings.

Don't forget to join the conversation on Ticker Talk.

Have a great night!

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No positions in stocks mentioned.

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