Another Bite Of The Apple

04/27/16 12:51:19 PM

by Koos van der Merwe

The Apple watch has proved to be a no-no, so Apple has reduced its retail price and brought out a smaller iPhone. Is this the winner?

Security: AAPL
Position: Accumulate

About a year ago, Apple brought out the Apple watch, a product that they believed would sell extremely well. However, the watch has not sold well. Tim Cook and his team appear to have forgotten that a fashion item, like a watch, is truly a piece of jewelery, which means that everyone would like to wear an item that is more beautiful and very different to what everyone else is wearing. A Rolex watch, for example, doesn't have to be more beautiful than an Omega watch, or a Seiko watch doesn't have to have more gadgets in it than a Rolex, it is simply the name, Rolex or Omega that sells the watch, nothing else. The fact that the Apple watch is a mini-computer linked to an iPhone is not enough to cause the world to buy it. So, what has happened to the share price over the past year, and what for the future?

Figure 1. AAPL monthly chart with Elliott wave count.

Graphic provided by: AdvancedGET.

The chart in Figure 1 is a monthly chart with an Elliott wave count suggesting that the share price of Apple has completed a major WAVE 5 and is now in the process of doing an ABC correction. The chart shows that the price is within the 4th wave of lesser degree falling to $92.96 in April 2016. This means that it should start rising either in a B-WAVE before falling further in a C-WAVE not lower than $56.42, the low end of WAVE 4, or the WAVE A shown on the chart could be a WAVE C, and the share price will start rising in a Wave 1 of a new uptrend. The RSI indicator has fallen and is testing the buy level, suggesting that a buy has possibly been given. Volume, however, is below average, suggesting that many investors are staying away from the shares.

Figure 2. AAPL weekly chart with Elliott wave count.

Graphic provided by: AdvancedGET.

Looking at the weekly chart in Figure 2 the Elliott wave pattern is confirming the completion of a WAVE A down. The RSI indicator is suggesting strength, but the Stochastic RSI indicator is suggesting weakness. The share price could then start rising in a WAVE B before falling in a WAVE C. Volume is below average.

Figure 3. AAPL daily chart with JM Internal Band and Elliott wave count.

Graphic provided by: AdvancedGET.

The chart in Figure 3 is a daily chart with a JM Internal Band. The chart is showing that a JM sell signal was given on April 19 when the share price was $106.70. The JM Internal Band is a 15 period simple moving average offset by 2% plus and 2% negative. A buy signal is given when the share price moves above the upper band, and a sell signal is given when the share price moves below the lower band. The RSI indicator is trending down and has not reached the buy zone. The Stochastic RSI indicator is at the oversold level, but has not yet given a buy signal. Volume is still below average.

The share of Apple is a share that one should watch and buy when the indicators suggest a buy. With its continual attempt to reinvent the ingenuity of Steve Jobs, they will eventually succeed, either by trial and error, or simply by good luck. This is a share definitely on my watch list.

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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TECHNICAL ANALYSIS

Another Bite Of The Apple

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