Apple - thoughts on the long term chart outlook

Apple - thoughts on the long term chart outlook

One of the most notable features of the current market landscape is Apple's 37% decline since September while the broad US SPX Index CFD has risen 3.5% over the same period.

We've had a lot of client interest in the outlook for Apple so I thought this may be the time to blog some thoughts on the long term chart.

 Big Picture

Between January 2009 and November 2011, the Apple share price increased fivefold from $78 to $390. During this time it followed what for many was a magnificent, orderly uptrend. The trend took the form of a well defined channel with major corrections bouncing off support at the bottom of the channel or the 40 week (200 day) moving average.

From the November 2011, the trend became steeper, beginning what with the benefit of hindsight, formed a blowout top.  During this time price increased a further 80% to peak above $700 in September 2012. Since then of course Apple shares have fallen sharply breaking below the 40 week moving average in late October and last week, taking out the trend line established in 2009.

The RSI on the weekly chart proved to be a good indicator of the final peak showing strong divergence with price.  It has continued to fall since but is still outside the oversold zone and not inconsistent with further falls to come. 

Apple CFD - Weekly. Source CMC Tracker

Is this a correction?

Despite the size of the recent decline and the break below the trend line, an Elliot Wave analysis of this chart looks consistent with the move down being a correction of the 2009/2012 advance and not something that's likely to break below the 2009 low.

This view of the chart is based on the 2009/2012 rally being a 5 swing structure that has so far been followed by a 3 swing or ABC decline. This is the classic Elliot corrective structure.

Apple CFD - Weekly

 Fibonacci Cluster 

There is an interesting Fibonacci cluster at around $395 on the Apple chart. This is shown above and consists of:

  • The 78.6% retracement of the 0/5 rally
  • A projection that the swing down from B to C will be the same size as (100% of) the A to B swing. This projection can be done using the Fibonacci Price tool in Tracker's drawing tools

Readers who watched my video on Fibonacci will know that my view is that Fib levels are best not viewed as potential supports. So this blog is not intended to predict that price will fall to $395.

However, if price does fall to and then stop at or close this level, it would be the classic Gartley ABC set up and something that traders of this strategy will be watching closely as a buying opportunity.