It's a New Year for the market and a new year for Apple (NASDAQ:AAPL). While AAPL still sported a healthy percentage gain for 2012, the technical action tells a much different story as it closed well off its highs. I trade AAPL very frequently, and in the latter half of the year the stock behaved in a way I have never seen before.
The question how is, which AAPL will we see this year?
There is a downtrend that has been controlling this stock since the breakdown from highs above $700. A head and shoulders pattern added to the downside pressure on AAPL. Some are saying the sell-off was due to the tax gain saving, some are saying hedge funds going out of business are selling the stock, and some point to supply constraints for the iPhone 5. Now that the year-end shenanigans are behind us, we can get a more pure sense of where AAPL is right now.
Can AAPL once again be a longer-term swing trade, or is it now just a trading vehicle?
Looking back to its price action last year, the first selling signals occurred when AAPL closed below its 21-day moving average in September after the left shoulder and the head of a head-and-shoulder topping pattern were formed. Since then Apple has been showing a lot of relative weakness as it was controlled by this 21-Day moving average all the way down to the low. There were still some good trades along the way off the moving averages. There was a nice Red Dog Reversal on November 16 that gave us a tradable move until it came into a big resistance at $600ish. After that it came back down, tried to reverse a few times and failed.
Going into the end of the year, AAPL spent most of its time below all key moving averages while a small descending channel was built. I was watching this descending channel as we were not sure if Apple would break its key support of $501-505 and continue to go lower.
On Monday, Apple gave us a powerful move as it held the key support of $501-505 and broke the lower wedge to the upside. It reclaimed the 8-day moving average, then gapped up on Wednesday and gave us another 3.17%. It was a very nice move from $510 to $555. Now the question is, can we see commitment? I'm still going day by day with this stock. If we can stay above $541.63 for a few sessions, we can see Apple continue higher.
It's time to trim some profits after a massive move since Monday. If AAPL can hold its new key support of $541.63, traders can potentially add above $555. The next obstacle will be the 50-day, and then 200-day moving averages. There is still a lot of resistance in the way, so at this point, it's prudent to take it step-by-step. Apple could see a push through the new key support but as long as it closes above it, the bulls are still in the game.
It's a new year so let's see if Apple will trade differently in the early stages of 2013. Holding the gap from Wednesday would be a good start toward reestablishing itself as a market leader. Sideways consolidation in this area would be good before the stock attempts to take out $555. Apple is reporting earnings on the third week of January so lets see where we are prior to that report. Until then, we will focus on potential short-term cash flow trading opportunities in the stock.
*Disclosures: Scott Redler is long AAPL, FB, YHOO, BAC. He is short SPY.