Why I Like Apple Here

09/11/2013 6:00 am EST

Focus: MARKETS

Greg Capra

Co-Founder, MasterTrader.com

From everybody’s favorite stock to pariah, Greg Capra of Pristine Capital Holdings, Inc., explains why he likes Apple now.

The Nasdaq 100 ETF (QQQ), of which Apple Inc. (AAPL) is a major part, is up against its resistance area that has turned prices lower twice in the past. That does not support AAPL accelerating higher right now, but the price pattern in AAPL does. For that reason, there may be some choppy action this week and we’ll see how that plays out. That being said, let’s review the setup in AAPL.

chart
Click to Enlarge

Several weeks ago, AAPL cleared price resistance decisively with the type of volume increase that should accompany a move like that. However, with any stock that had been in a prior downtrend, the next resistance area becomes the next wall of supply to absorb or be turned down from. So far AAPL has been absorbing that supply very well by staying at the upper part of the wide range weekly range of the break above resistance. Last week’s close above the opening weekly price since the breakout is the first sign that buyers are taking control again and a move above last week’s high could start the next move higher.

Let’s take a look at the details on the daily time frame.

chart
Click to Enlarge

When price breaks out above a prior high, it’s not uncommon for prices to retrace back near that area and then move higher again. AAPL didn’t do that. Rather, AAPL only pulled back about half the move from the prior low to the high it made and moved up to test its new resistance area. This is what I call “creating new support.” That new support was tested last Friday and AAPL sprung up from it as buyers took that drop to it as an opportunity to pick up shares there. That bottoming tail (BT) that formed Friday should be a low point that should not be retested. The rejection of a price area typically sets a low that prices move higher from. The confirmation we want to see is a move above the dotted red line that marks last week’s high and a pivot on the daily time frame.

By Greg Capra, President & CEO, Pristine Capital Holdings, Inc.

Related Articles on MARKETS