Chart of the Day – $AAPL Countertrend Rallies

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AAPL’s fall has been further and faster than most expected, myself included.  As of yesterday’s close, AAPL was down about 40% from its close on Sept. 19, less than 6 months ago.  An incredible move for (what was) the largest market cap company in the world.

The downtrend has been relatively well-behaved, never breaching the 50 day moving average despite several countertrend bounces:

7 month daily AAPL chart, Courtesy of Bloomberg

7 month daily AAPL chart, Courtesy of Bloomberg

 

There have only been 3 countertrend rallies that lasted a couple weeks, all drawn in green on the chart.  None of those rallies were able to breach the 50 day ma, and all of them failed in short order.  The first rally from late Nov to early Dec was the most explosive, as AAPL rallied about 17.5% from low to high.  The next 2 rallies were only about 10% from the the low to the high.

The prior 3 rallies all occurred after 15-20% selloffs in AAPL that usually culminated in capitulation selling and very heavy volume.  The current selloff from the Feb. 11th high around 485 has almost reached 15%, so a countertrend bounce is likely not too far away.  More importantly for me though, AAPL is now quite close to longer-term support, shown on the 5 year weekly chart:

5 year weekly chart of AAPL, Courtesy of Bloomberg

5 year weekly chart of AAPL, Courtesy of Bloomberg

The stock traded between 360 and 420 for almost 6 months before breaking out, and that price history should offer a good reference point for new long positions around 400.  In short, the risk/reward of playing for a bounce is rapidly improving as AAPL moves closer to 400.  For the first time in many months, that improved risk/reward applies to both a short-term and intermediate-term time frame.