Thursday, June 12, 2014

Apple Inc. (AAPL): A 3T Analysis – Going to the Top?

There is a lot of talk that Apple Inc. (NASDAQ:AAPL) has found its mojo, gotten "it" back and is ready to rock. There was even a headline that said, "Apple is heading to New Highs, and there is Nothing You Can do About It."

Besides short sellers, not sure who would want to prevent AAPL from heading higher? Samsung?

One of the reasons shares of the iPhone maker might go higher is a 7 for 1 stock split that will happen after the market close on Friday, June 6, 2014 (today). The stock will begin post-split trading Monday, June 9, 2014.

So, with all the hype surrounding Apple, we decided to take a 3-T look at the tech company's stock charts to see just where the stock price might be headed.

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On the daily chart for the past year, we notice that the share price is racing away from seven months of consolidation. Shares are hugging the rising 10-day moving average.  The stock does appear a little extended in the short-term; however, there is room, plenty of room for momentum to take the price higher (more on that below).

The five-year weekly chart does show AAPL constructing a "T" or triangle pattern.  It has been tracing out the right side of the shape since April 2013. If the image is completed, it would take Apple back to its all-time highs in the $700s – low $100s in the post-split era.

Breaking through the ceiling, however, could be tough as volume is not confirming price. As AAPL moved higher, volume dwindled, which is not the relationship preferred by chart-watchers.

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In our next chart, AAPL shares are trading more than 1 standard deviation above the normal 20-day trading range. Like dogs chasing cars, it's not a condition that last too long.

It would not be surprising to see Apple bounce higher on post-split enthusiasm, but reverse course quickly thereafter, most likely to its 20-day average. That might be a good place for patient investors to pounce.  

Finally, as we mentioned up top, Apple has plenty of overhead room for momentum to carry the price higher. As you'll see on the rate-of-change (ROC) graph below, there is plenty of upside to the tops of the 5-day, 15-day, and 25-day ROC levels. The chart supports the idea that a run to the all-time high, via finishing the right side of the triangle is possible.

Overall: Apple Inc. (NASDAQ:AAPL) could be on the way to regaining past glory; however, a post-split correction could be in the cards, and divergent volume and price patterns  could mean finishing the triangle pattern is the best it is going to get. 

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