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Another Look At Apple

01/09/12 09:52:27 AM
by Koos van der Merwe

The year 2011 was a year of high volatility and stress. What about 2012?

Security:   AAPL
Position:   Hold

The year 2012 is year 4 of the US presidential cycle. It is a year that past history has shown when the market rises in anticipation that a president will be elected for a second term. So, knowing this, it now becomes a matter of which stock to buy & hold.

Graphic provided by: AdvancedGET.
Figure 1 is a monthly chart of Apple (AAPL) that shows how the share price has risen from a low of $0.58 in 1987. All this was because of one man, Steve Jobs. Now that Mr. Jobs is no more, what of Apple? Will the company be as revolutionary as it was under his care? The chart does suggest a correction is due. The relative strength index (RSI) is at oversold levels. The share price is rising and volume is falling. Does this suggest that a correction is due? To decide, we should look at a daily chart.

Graphic provided by: AdvancedGET.
Figure 2 shows how the share price kept finding support on the trendline. The chart also shows how the share price broke above the JM internal band, giving a buy signal on November 30. It then fell and tested the lower JM band on December 15 but did not break through, giving a sell signal. Then it rose, breaking above the upper JM band, looking to test the high of 426.76. Volume has been falling as the share price rose, suggesting weakness.

The JM internal band is a 15-period moving average offset upward by 2% and downward by -2%. A break above the upper band is a buy signal, and a move below the lower band is a short sell. You would hold the share until a sell is given or the stop signal you have placed on the share price is hit. Long-term investors would use the lower band sell signal to close a position.

At the moment we would not be a buyer of Apple shares. If you own them, however, they should be a hold until a sell signal is given.

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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