Apple Inc. (AAPL) exceeded quarterly profit projections when it disclosed data on April 30 after the market closed. On April 22, the stock held its quarterly pivot at $272.81, laying the groundwork for a bullish response to results. The possible upside is to its monthly hazardous level of $337.57.
The Dow Jones Industrial Average component and renowned iPhone producer exceeded earnings per share projections for the 16th straight quarter. According to Macrotrends, the company is not cheap, with a P/E ratio of 23.82 and a meager dividend yield of 1.01%.
Apple’s shares finished last week at $310.13, up 5.6% year to date and 45.9% above its March 23 low of $212.61. The stock is 5.4% lower than its all-time intraday high of $327.85, which was reached on Jan. 29.
The daily chart for Apple
Apple’s daily chart indicates that the company has been trading above a golden cross since May 9, 2019, when the 50-day simple moving average crossed above the 200-day simple moving average, indicating that higher prices were on the way. The stock then fell below its 200-day simple moving average as a buying opportunity between May 10 and June 7. This indication led to the stock reaching an all-time intraday high of $327.85 on Jan. 29.
On February 24, the stock fell below its 50-day simple moving average of $305.74, and on February 28 it challenged its semiannual value level of $262.02. On March 13, Apple shares failed to sustain $262.02 after a strong comeback. On March 17, the yearly value level of $253.68 also failed to hold. On March 20, the 200-day simple moving average failed at $248.61, and the March 23 low was $212.61.
On April 6, the rally surpassed the 200-day simple moving average of $251.36 and the yearly pivot of $253.68. The semiannual pivot was vaulted on April 8, and the quarterly pivot was a magnet between April 13 and April 21. On April 23, the stock above the 50-day simple moving average of $274.93, paving the way for the good earnings announcement on April 30.
The weekly chart for Apple
The weekly chart for Apple is positive, with the stock above its five-week modified moving average of $283.25. The stock is well above its 200-week simple moving average, or reversion to the mean, at $183.60. Notice how tests of this moving average provided buying opportunities.
The 12 x 3 x 3 weekly slow stochastic reading rose to 57.36 last week, up from 50.19 on May 1. At the January high, this reading was 94.00, well above the 90.00 threshold putting the stock in a “inflating parabolic bubble” formation. The bubble popped to the March 23 low. At the January 2019 low, this reading was below 10.00, indicating that the stock was technically “too cheap to ignore.”
Trading strategy: Buy Apple shares on weakness to the quarterly, semiannual, and annual value levels at $272.81, $262.02, and $253.68, respectively. Sell shares on strength to the monthly risky level at $337.57.
How to use my value levels and risky levels: The closing prices on Dec. 31, 2019, were inputs to my proprietary analytics. Semiannual and annual levels remain on the charts. Each calculation uses the last nine closes in these time horizons.
The second quarter 2020 level was established based upon the March 31 close, and the monthly level for May was established based upon the April 30 close. New weekly levels are calculated after the end of each week, and new quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year, while annual levels remain in play all year long.
My theory is that nine years ofvolatilitybetween closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings:My choice of using 12 x 3 x 3 weekly slow stochastic readings was based uponbacktestingmany methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 consideredoverboughtand readings below 20.00 consideredoversold. A reading above 90.00 is considered a “inflating parabolic bubble” formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered “too cheap to ignore,” which is typically followed by gains of 10% to 20% over the next three to five months.
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