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WD Gann's Apple

06/21/11 11:37:08 AM
by Koos van der Merwe

Here's a look at Apple Inc. the way WD Gann would have seen it.

Security:   AAPL
Position:   Sell

The market does seem to be recovering after the six week selloff, but why are Apple (AAPL) shares continuing to fall? Are short-sellers going overboard? Rumor has it that the iPad 3 will be out in September, offering even better screen resolution, not to mention 3-D capability, so why the negativity?

Graphic provided by: AdvancedGET.
Figure 1 is a Gann chart and shows the following:

a. The first Gann square squared out at the $192 level, with the share price rising to $209.60 using the $192 level as a base before its next up move.
b. In the second Gann square, which squared out at the $303.78 level, the price rose to the $276 level, the 75% level before consolidating around the 50% level at $248.
c. The share price then rose into the third Gann square, topping out at $359.60, the 50% level, consolidating at $331, the 25% level.
d. This means that according to Gann, the price should move into the fourth square shown on the chart and test the $303.78 level, even possibly forming a base at the $276 level. With Apple's product strength, we could ask, "Why should this weakness happen?" I will not even try to answer that question.

Note that the share price has fallen below its 1x1 buy zone. I will now start looking for a new buy zone, hopefully from the $303.78 level. The relative strength index (RSI) is oversold and could suggest a buy soon, although any serious bad news could see the RSI meandering at this level as the share price forms a new base.

WD Gann would have sold AAPL shares at the $359 level, the sell zone as shown on the chart. He would not be a buyer at the moment but would watch the chart carefully as the share price moves into the fourth square, looking for a consolidation pattern to develop.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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