After some volatile action, Apple (AAPL) prices have settled within a short-term trading range or descending triangle pattern.
Specifically, prices have bounced between a key support level and falling daily EMAs.
Let's update our current Apple charts and note these short-term levels along with the Weekly Chart Fibonacci and potential targets should Apple break free from this range soon.
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In our last update, I highlighted the EMA Compression and potential breakout levels from the late November 2012 push between the 20 and 50 EMA. Price stalled and reversed from the 50 EMA to retest the $500 key support level.
From there, price traded between the falling 50 day EMA and the horizontal $500 support line which leads us to our current compression level.
The key focal point on the Daily Chart – from a resistance standpoint – would be the $550 confluence of the falling 50d EMA, January swing high, and the upper Bollinger Band. Keep this in mind as you study the weekly chart below.
The key chart-based support level is the $500 ‘triple reversal candle' bottom that has held (so far) from November to January.
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While short-term traders can play price movement towards or away from these levels during the compression phase, other traders may decide to wait for a breakout from the current consolidation boundaries before putting on a new position.
A bullish breakthrough would likely trigger on a clean breakthrough above $550 while a bearish breakdown would trigger on a clean break – and close – under $500.
Let's raise our perspective to the Weekly Chart to confirm these levels and note potential upside and downside breakout targets.
I drew two classic Fibonacci grids as labeled from the August 2010 swing low and the June 2011 swing low to the September 2012 high into $701 per share.
The purpose here is to find potential confluences or overlap in the Fibonacci levels.
In terms of the Fibonacci grid, price has recently been consolidating between the 38.2% level of the larger grid and the 50% retracement of the short-term grid.
Price found resistance into the 38.2% level of the short-term grid into $550.
I mentioned the $550 level on the Daily Chart, and we can see from the Weekly Chart that we have two more indicators to align at this level: The falling 50 week EMA and the 38.2% short-term Fiboncci grid from 2011.
What levels are important from the Weekly Chart?
Once again we note the $500 support confluence and any breakdown here could lead to a sell-swing toward the loose Fibonacci confluence near the $460 per share level.
An upside breakthrough above $550 would clear the confluence resistance barrier and could suggest a continuation at least to $600, and a breakthrough above $600 would be a clear bullish reversal (late) confirmation signal.
Once again, short-term traders can play between the $500 and compressing $550 boundary (though watch the immediate 20d EMA at $530 first) while others can wait for a breakout above $550 or beneath $500 to try for a breakout play toward the weekly chart Fibonacci levels.
Be safe and monitor real-time developments with these key pivot levels on the Daily and Weekly Charts.
Corey Rosenbloom, CMT