Here's The Chart That Shows Apple Is Due For A Pullback

There has been a lot of discussion on this particular thread on Seeking Alpha regarding AAPL, so I decided to do some technical analysis on this stock to see if the charts are suggesting if Apple is a short as the author suggests.

It’s been quite an active thread with many traders criticising the author for even thinking about shoring this stock.

I’m of the opinion that nobody should marry a stock no matter how well it’s performed in the past.

I’m also cautious when shorting leaders and one has to wait until it officially breaks down before committing. A good rule of them is to sell the second reaction down after a top has formed.

Below is a 4 yr chart that clearly shows a massive cup with handle that played out perfectly. If you measure the distance from the bottom of the cup to the confirmation line, and then add that distance on top of the confirmation line you have a general idea how far the stock should move up if the breakout remains intact. You can see here that it played out to perfection and now is a time one should become cautions and protect your profits.

Another option would be to sell some calls against the stock if you hold shares. That way if you want to hold onto your shares at least you’ll be getting paid some “rent” to hold the stock through a potential pullback.

Apple Weekly Candlesticks

aapl

Photo: Jeff Pierce

Apple Daily 3 Line Chart

There doesn’t appear to be any weakness in this chart, but it is obviously extended as each pullback is bought up. It’s been riding the 13ema for the last 18 months and is well over 50% it’s 200ema. Not a time to be initiating new long positions.

aapl

Photo: Jeff Pierce

Apple Daily CandlesticksThis chart looks like a mess, but let me explain what I’m trying to illustrate. Basically this entire run from September until now 240-320 has not had a pullback to it’s 38.2% Fibonacci retracement level. By taking the low in August and running it to each peak you can see that AAPL has been so strong that it won’t even retrace to the bare minimum of a shallow correction. Sooner or later it has to correct to at the very least this level, which would be about 30 points south of where it is now. That would give a short a nice enough buffer to allow their position to accrue more profits to the downside.

aapl

Photo: Jeff Pierce

In conclusion, I don’t see a short opportunity at this exact moment, but if I had to pick the next short term move in this stock I would have to say it’s going to be down. Part of that is due to some extreme sentiment measures in the overall markets which would almost certainly drag this stock down with it. The other is the bearish wedge that is obvious. The only thing that would change my opinion of this stock is a clear high volume breakout move to the upside and even then I wouldn’t be buying this stock. If I was long I’d use that to lighten up even more.

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