Given the stellar recent earnings report from Apple Inc. (AAPL), I thought it would be interesting to take a long-term Fibonacci view of this stock. AAPL made a low in the fourth quarter of 2000 at $6.81 (point a).
Using the rally from this low to the 2007 high at $202.96 (point b) we can derive some interesting upside targets. The 100% target (in black) from the early-2009 low at $78.20 was at $274.35. APPL peaked in April 2010 at $272.46 before correcting below $200 the following month. The 161.8% target at $395.57 was exceeded in July 2011.
The retracement targets can also be calculated using the decline from the 2007 high (point b) to the 2009 low (point c). The 127.2% target (in red) was at $236.90, while the 261.8% target was at $280.06, which coincided nicely with the equality target at $274.35.
For those Apple superbulls, the 261.8% projection target is at $591.72 with the 423.6% retracement target at $606.68. Though these targets may seem pretty crazy now, the long-term technical action is positive. The quarterly on-balance volume (OBV) started an uptrend in 1998 and has since made a clear pattern of higher highs. It still looks very strong and is likely to make another new high this quarter.
In this lesson, I concentrated on the longer-term charts to emphasize the power of the technique. Of course, the same techniques can be applied to weekly, daily, or even hourly data, but as you shorten the time frame, the margin for error becomes higher.
For those of you who want to apply this analysis on your own, I would recommend you take the time to analyze some monthly charts that have pronounced uptrends and/or downtrends. First, do some hindsight analysis, but then also make note of your future price projections and keep track of them to see how well they worked.
I will continue to point out the Fibonacci targets in my daily Charts in Play column, which should give you another way to judge whether this technique may be useful in your trading and investing.
Though I have been developing my approach to Fibonacci analysis for many years, my old friend and veteran Fibonacci expert Joe DiNapoli helped me get started. I always found his methods to be very interesting, and for those of you who would like to learn from a real expert, I would recommend his book, Trading with DiNapoli Levels: The Practical Application of Fibonacci Analysis to Investment Markets.