Apple is Ripening

• Posted by Greg Harmon
• on August 13th, 2013

Apple made a big move on news of Carl C iCahn™ having a large investment and seeing it undervalued. That is great news for the value investor. But that is not me. Today did signal a continuation in the change in the price action that has been going on for over a month though, and that interests me. Lets look at a few charts.

The chart above shows the change of character that occurred as the price moved below 460-480 area. Most of the consolidation that took place there happened between 413 and 460 but there was a double bottom that was put in in the 380-386 area. Moving higher off of that double bottom it had already put in two thrusts higher to 432 and 469 followed by short bull flags. Today confirms the break of the second bull flag and a target on a Measured Move to 505. This would fill the gap from January, and complete a 3 Drives pattern. This is all very bullish. But there are some indications that a pullback may be in the works soon before any bigger move could happen. The clean simple chart below shows a gap over the 200 day Simple Moving Average (SMA) and close there for the first time since November 1, 2012. It also shows the beauty of the 590 day SMA settling over the consolidation. But the Relative Strength Index (RSI) is not technically overbought. Finally adding the Moon Phases shows that relative highs have occurred close to full moons and relative lows

more often near new moons. I am sure that many of you have now stopped reading, but you could have drawn this as cycle lines 2 weeks apart as well if that makes you feel better. The point is there has been a natural rhythm in this stock with a 4 week cycle of roughly 2 week highs followed by 2 week lows and this just happens to be the same cycle as the Moon Phases, and it suggest a relative low is coming.

None of this is a guarantee for a pullback or for a continued move higher. In fact the accumulation/distribution suggest that there are not a lot of committed buyers getting in yet. So even though Mr iCahn™ is on board I suggest some caution in your first entry. Perhaps start by selling some September 440 Strike Puts or using a September 440/525 bullish Risk Reversal for your first entry. Then when it commits over the gap fill you can add shares.

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