AAPL Stock: Time to Act Accordingly
I am focusing on Apple Inc. (NASDAQ:AAPL) stock because on December 30, 2016, I outlined $165.00 as a potential price objective in a publication titled “Apple Inc.: AAPL Stock Chart Suggests New Highs in 2017.” The notion set out by the publication’s title has come to fruition, and AAPL stock is now within striking distance of the infamous $165.00 price objective. The timing is quite impeccable because the company announced it will be unveiling the “iPhone 8” on September 12, and these events have always acted as a catalyst to move the Apple stock price.
My views on a particular investment are generated by analyzing the company’s stock chart. This method of investment analysis is known as technical analysis and it is based on the notion that historical data can be used to forecast what the future may bring. My report was published on December 30, 2016, when AAPL was trading at $116.76, and the results that followed are a testament to the value this method of analysis can provide when it is applied appropriately.
In order to review the $165.00 price point, I will first need to outline the constructive price action on the following Apple stock chart that was responsible for generating this price objective.
Chart courtesy of StockCharts.com
The AAPL stock chart illustrates an alternating two-wave structure consisting of impulse waves and a consolidation wave, which I refer to as constructive price action. Constructive price action creates the necessary building blocks to set up and sustain a trend.
The impulse waves, which are highlighted in green, define the stage in a bullish trend where an advancement in the stock price occurs. The consolidation wave, which is highlighted in purple, defines the stage in a bullish trend where the stock price refrains from advancing because overbought conditions are being unwound. Consolidation waves are very strategic waves because they set up the next impulse wave.
The $165.00 price objective was obtained using this wave structure. The theory behind these waves is that impulse waves that are separated by a consolidation wave will have tendencies to mirror each other in terms of length, which means that the consolidation wave acts like a midpoint. The initial impulse wave was approximately $80.00 in length, and that value was used to create the $165.00 price objective.
This objective is very significant, especially when I take a step back and look at the big picture. This big picture is quite intriguing and it is difficult to dismiss its significance.
The following Apple stock chart illustrates the “big picture” I am referring to.
Chart courtesy of StockCharts.com
The big picture illustrates a trend that began in 2009 following the financial crisis. This trend contains the quintessential characteristic that defines all bullish trends: a series of higher highs and higher lows that act to move the stock price from the lower left to the upper right of the stock chart.
This quintessential trend is effectively captured using a technical price pattern known as an ascending channel. This pattern contains two parallel upward-sloping trend lines that define levels of price support and price resistance. Apple stock has been oscillating between these two trend lines for almost a decade, and as long as it remains inside this pattern, the only presumption that can be made is that higher Apple stock prices will continue to prevail.
The $165.00 price objective coincides with a very significant level of price resistance, and it can be argued that a correction is now set to ensue. One could also argue that the stock price is going to break out of this ascending channel and go on a parabolic run to the upside. What happens next is very significant and influential.
The iPhone 8 is being unveiled on September 12, and that event will likely act to the move the AAPL stock price. In the past, these events have acted as a catalyst to sell AAPL stock, similar to the old adage, “buy on rumor, sell on news.”
Given the circumstances, I have little choice but to step back from a bullish position on Apple stock. My systematic approach to investment demands discipline, and that is exactly what I am practicing.
Apple stock is approaching the $165.00 price objective I outlined in a publication in December of last year. This price objective currently coincides with a very significant level of price resistance. These circumstances just so happen to also coincide with the unveiling of the next iPhone, and these events have usually acted as a catalyst to move the stock price. As a result, I have little choice but to step back from my bullish view on AAPL stock, because my disciplined approach to investing demands it.