No Leadership from Apple Right Now
We’re getting to that time of year where volume historically drops off, and the action is light. As an investor, this is a frustrating period because you want to commit, you can see the setup, but neither the Bulls nor the Bears have the guts to take the other over line. So all you can do is wait, and wait, and friggin wait.
The number of shares traded for Apple (AAPL) was incredibly low. You’d have to go all the way back to the day before Christmas last year to find a comparable volume, and that was a half day! The other problem is that the markets are trading in a very tight channel, bounded by strong support and resistance lines. And until there’s a break out of that channel, we’ll continue to drift along.
Typically you would see a leader in the pack, like AAPL or one of the other horsemen, like Research in Motion (RIMM) or Google (GOOG), show the way. But there’s no such leadership right now. Please don’t get aggressive here, within such a tight channel you can get slaughtered. It’s better to wait for the break, and it will come, whether it’s up or to the downside - then get aggressive.
Click image to enlarge
The channel that has developed for AAPL is what I have characterized in past posts as a Pennant pattern. A Pennant is a consolidation pattern which typically precedes a bullish advance. In this case it may not be so typical due to market forces. Within the pattern we have support around 171.50 and resistance in the 176.50 to 177 range. In my opinion the favor is to the down side, because we have both the 20 and 50 day moving averages riding inside the pattern, providing additional resistance above current price action at 174.56 and 17.96 respectively. They have bounded upside action for the past 2 trading sessions, and may continue to do so.
While the patterns on the Nasdaq and S&P are similar to the one around AAPL, I would characterize them more like a Falling Wedge, which is a reversal pattern, but without the confirmation of a positive divergence (at least on the daily charts, weekly charts are another story). Although the Naz is much closer to AAPL, which reflects the recent strong uptrend of the Tech sector a couple weeks back, the S&P had no such advance.
The trading ranges we’re dealing with on the indices are as follows: The S&P is bounded by 1290-1310 resistance on the upside and 1260 support on the downside. The Naz is bounded by 2400 resistance and 2360 support. We breached 2360 Tuesday only to barely recapture it in the last hour of trading. As I said, I believe the markets favor the downside, but the Bears have shown no ability to take the market down when they had the opportunity.
As a trader, you need to have patience here. Let the market reveal which direction it intends to take. It will be come apparent when the conviction returns because volume on one of these levels will be breached and volume will pick up. Patience is truly a virtue in this case. How long will the wait last? Dunno. Maybe we’re waiting for after Labor Day when everyone is back from their vacations. One thing of which I’m certain, when the break occurs, hit hard and you will more than likely be rewarded.
Disclosure: Long Apple
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This article has 23 comments:
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papita
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40 Comments
Aug 27 09:23 AM-
Julian Ivan-Alexander
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206 Comments
My Website
Aug 27 09:26 AMWhat are you talking about you fool? The 20-day MA is at about 169/67, and the 50-day MA at 170.22. In fact, the 20-day is crossing above the 50-day today. Resistance? They're support!
Ern, I suggest you return to the wilderness - you're obviously looking at your charts upside down. Or maybe you just haven't got a clue.
Your advice is toxic to investors. You consistently screw up your TA and mislead people, only to apologise when you are caught napping at the wheel having crashed into the TA barrier ahead.
Words fail me.
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the Graduate
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13 Comments
Aug 27 09:39 AM-
Julian Ivan-Alexander
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206 Comments
My Website
Aug 27 09:48 AMSeekingAlpha take note.
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kvnmcc54
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2 Comments
Aug 27 09:59 AM-
Thoughtful
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25 Comments
Aug 27 11:17 AMFollow this guy's advice and you will only preserve capital for your broker in fees and margin interest. Why does SeekingAlpha keep publishing this stuff? Ernie (Zach) is a JAVA PROGRAMMER, not an analyst.
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Gawed
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3 Comments
Aug 27 11:19 AMTommo_uk you're in your right to be nasty but please review your facts... my numbers on MA are exactly the same as Mr. Bass here, maybe you're seeing another scale in your charts and failed to notice the one used in this article?
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Zach Bass
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82 Comments
My Website
Aug 27 11:59 AMI despise replying to such vitriol, but I should point out Tommo_UK is a regular reader of my work in many venues where I publish, and a constant antagonist. Kind of ironic.
Also, I think he has mistaken my analysis to be anti-Apple, which it is not. I'm long on Apple. I'm just pointing out the current market situation as I have interpreted it.
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iJah420
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26 Comments
Aug 27 12:00 PMWait till you get Q3 #ers. Look @ the big picture Buddy Boy.
ijah420 says those charts don't mean SQUAT!
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BS Detector
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296 Comments
Aug 27 12:08 PM-
Jo Beaver
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2 Comments
Aug 27 12:17 PMperson on the face of the earth.....look...even Freud said...'sometimes a good cigar is just a good cigar'....all of the predictions based upon any method, including a pennant philosophy are based upon the past...the data has already happened.....even the "darts" at the WSJ beat the experts on a continual basis.....long, slow, dollar cost average is the key...forget the pennants unless you are rooting for the Cubs.
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Thoughtful
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25 Comments
Aug 27 12:35 PM1. Posting to a message board, beginning three months ago, where Tommo has been active and accurate for YEARS does not constitute "publishing"
2. Referring to anyone on that message board as being a "regular reader of my work" is ridiculous and denotes hubris which may exceed any I have seen before on SeekingAlpha. Your repeated posts to the referenced message board are hard to ignore, since they are so numerous and disruptive.
I suggest that you factor in a new variable to your TA:
www.narcissism101.com/
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dithers
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56 Comments
Aug 27 12:45 PMIt isnt going to stay at $175 for ever, and down for a company posting YOY growth of 40 - 50% seems unlikely.
US market share for Apple now at 10.5%!
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Gawed
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3 Comments
Aug 27 01:20 PMSaying that i give more validation to comments from Tommo_uk who as mr. bass himself has said is a regular antagonist of him than any other comments in here.
I only read Zach's articles in here (seekingalpha) but with that i know that:
1) HE HAS A LONG POSITION ON APPLE so i hardly think he's interested in short term prediction just commenting in a company he likes and has interest on
2) He uses both technical and fundamental arguments on his articules, actually most of what i've read tends to be fundamental rather than an article like this.
3) if you read the topic of the article the sole base of this article is to share a point of view through a chart about how right now Apple is not leading Nasdaq or S&P movements and those who care (day traders, short term players) could take notice...
so if you can't even understand the meaning and message of an article.. regardless of your beliefs dont comment!
Zach, sorry to use your article as venting against people who comment without reason but today I just couldnt take it anymore.
It would be better to actually see just comments like Tommo's who at least focuses on the articule and challenges it than mere monkeyminded talk from everyone else
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kvnmcc54
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2 Comments
Aug 27 02:52 PM-
crappletv
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9 Comments
Aug 27 02:55 PM>the economic factors at the moment, and that they will burst
>out soon and hit $250 - $300.
I have a different feeling. Mine is based on the heresay of the apple employees that I regularly interract with.
Apple is losing a lot of experienced talent at the moment and replacing it with less experienced talent.
Apple has a significant number of senior engineers who are burnt out and rich enough from stock options, the RSU's that are coming online, and discounted employee stock purchase to not give a flying f*** about whether they contribute or not. It has a significant number of junior engineers who are not invested in the success of Apple via options or RSUs and are not further motivated by having engineers and mangers in leadership positions slack off.
Apple has quality issues some of which are well publicized (MobileMe, iPhone 3G dropping calls, original iPhone software upgrade issues, iPod batteries, etc.), some of which are not.
Apple has a great deal of uncertainty about it's leadership succession plan.
The company has gone through a period of sustained growth, but this *has* affected the quality of it's products and services. All of these issues are liable to to have a retrograde effect on product quality, which in turn will become more of an issue in the coming couple of years.
So $180 might actually be where it stays for a while. The company does not have the resources to continually move to new products without that affecting existing products. A great example of the effects of this are seen in predicted (by the company) vs actual release times: Leopard was significantly late due to a shift in resources to iPhone.
So you can look at the charts, or you can look at the company. I'd suggest the latter will yield more clues about future performance.
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No hearsay here
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25 Comments
Aug 27 03:30 PMI work for Apple because I love the products and I love how we make 'em. You would have others wrongly believe that we're not a proud group. You think we don't care about what we make?
Your mindless, sweeping generalizations are breath taking.
P.S.: it's "hearsay," not "heresay". Your command of the language is as good as your Apple knowledge.
[comment edited for abusive language; commenter put on watch]
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jack_carlton
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1 Comment
Aug 27 04:03 PM-
Sacto Joe
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3 Comments
Aug 27 04:28 PMIf you run a comparison over the last month (i.e., after the bounce-back from the previous major sell-off), you see that Apple tracks very closely to the market as a whole. I also note that, at the end of your "flag" there's a distinct uptick in both Apple and the general market.
Coincidence? Maybe. But my guess is that the general market itself is going to have to supply any "leadership"... at least until Apple's new numbers come out and they once again blow away Apple's own ultra-conservative guidance.
The bottom line: As a former Presidential candidate once said, "it's the economy, stupid". And the health of the economy, IMHO, depends on one thing right now more than anything else - jobs.
And I DON'T mean Steve Jobs!
I still expect Apple to top 200 this year, more or less permanently. Under the circumstances, that's pretty darned remarkable. 300 next year.
Oh, and as concerns Apple employees who have all this stock and no longer "give a flying f*** about whether they contribute or not", that's utter tripe. Why, if you've got a good thing going, would you do anthing to jeopardize it? Just the opposite: you'd do what ever was in your earthly power to make it even MORE of a good thing!
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mag
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28 Comments
Aug 27 05:23 PMExactly...No Leadership...that's what the article is all about..No Leadership in spite of all the hype about the iPhone 3G you name it
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Jon T
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329 Comments
Aug 28 08:36 AMI call troll. Your bullshit is just too obvious.
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mollytjm
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326 Comments
Aug 28 10:20 AMbut apple, unlike some others, owns up to and fixes it's problems.
even apple was surprised at the pent up demand for the second generation iphone and was overwhelmed with too much to handle. but the reason is that people are learning that it makes great products and overall, has great tech support.
as far as Zach's blog, he's more informed about the company than most. analyzing appl stock price has proved difficult for everyone.
but it would be nice to just have a discussion without the blather and bullying.
i'm not a day trader...i buy and hold and i'm long apple.
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brewer
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416 Comments
Aug 28 10:37 AMThere is momentum to success and investment. In no way has the market caught on to Apple's momentum, influence, or role. They are in denial still. Tech is a great place to be right now.
Lots of people are seeing the economic troubles and assuming people will scale back on computer purchases. To some extent there is truth to that, but the main point is rather than computers are a necessity now, not a luxury item. Some see Macs as a luxury to a PC, which is actually a valid argument, but the difference is that it is an affordable luxury.
A home run for Apple now would be further discounts on great products. Margins could go down a bit, short term, but the marketshare benefits could be enormous.