Wednesday, July 24, 2013

Apple (AAPL)...

Apple came out with their Q3 earnings after the bell yesterday. Business Insider has some excellent in-depth coverage that I would highly recommend checking out in more detail. Basically the key takeaways were:
Revenue: $35.3 billion versus $35.18 billion expected by sell-side analysts. Whisper  was $37 billion. Apple's guidance was $34.5 billion (midpoint).
EPS: $7.47 versus $7.34 expected by sell-side analysts

From a technical/price action stand point, I have posted the above charts. The top most chart shows the decline in prices from $705 to it's most recent just under $400. It's interesting to note that there have been two separate but almost identical $200 point drops in the stock price that got us to those most recent lows.

I believe we are in the middle of a base building pattern that should conclude with a break out to the upside. The bottom chart above shows that pattern a little closely, it does appear to have a somewhat distorted inverted head and shoulders pattern. I think $420 below is decent support going forward and the real test will be can we take out that $465-$470 high.

If we can, a move back into $550 would be a high probability, which would coincide with the top end of a projected trading range and midpoint of the $705 highs to current lows.

I think any further weakness below $420 and of course $385 would send the stock price back down to $300. The bear market in Apple during the 2008 financial crisis sent the stock down over 61%, so an Apple stock price around $300 would about match that bear market drop in percentages. I would have to assume this scenario is unlikely but if it did occur, would make Apple a great buying opportunity.

It's always important to have a plan for both sides of the trade, it helps keep you from becoming "married" to one side.