Apple Inc (AAPL)

I am going to start this post by giving you a longer view of Apple Inc. 

This chart begins late in 2012 when a share of AAPL was going for about $700.  This chart ends at present day. 

This is a Weekly chart of AAPL

Click for a larger chart of AAPL



• I find that many of us forget to look at the big picture.  Instead we get caught up in the smaller one and miss out on some details.  This chart of AAPL shows me some pretty handy info yet it is clean, simple to read, and lends itself to interpretation. 

What's on the chart? 

 

• Let's start with the long red downtrend lines (DT).  They show the decline from $700 to $400.  All three of them were drawn during the downtrend.  One of them follows the initial downtrend from $700.  The middle one starts at $700 and touches the top of an uptrend late in the downtrend.  The last one is similar to the middle one as it too starts at $700 and touches after an uptrend occurs.  Why draw these lines?  I was looking for the bottom...

• The smaller red DT lines are places you could have gotten into AAPL after the run back up began.  Do you ever hear people saying it's too late to get in?  They might be right.  But when you can draw a short downtrend line and the price breaks above, it is probably safe to try going long.  Don't worry that you didn't catch the uptrend at the Double Bottom.  Most people didn't.  It's ok to begin an investment after the beginning of a trend.  Just plan your exit so you limit your losses if the investment doesn't work out.  There is more detail about places to get into AAPL later in this post.

• The green line labeled "Double Bottom??" is exactly what it seems.  I was asking myself if this could be a double bottom.  If it was I knew there was a chance it was a sign that AAPL had seen the lows and it would be a good time to go long the stock.  Looking back it was a great time to go long.  That was about $150 per share ago...

• The green uptrend line labeled UT 1 shows the trend that AAPL has been following since that double bottom.  UT 2 is an accelerated trend that the price has been following since September 20, 1013.  As long as UT 1 holds, I will be long AAPL...

• The horizontal dashed lines are Fibonacci Retracement lines.  You don't have to have a Math degree to understand how to use them and what they mean.  But if you are in the Math degree club you probably know a little more about Mr. Fibonacci than you care to :-)  Anyway, I find it very interesting that AAPL came back to the 50% retracement line before turning up again.  It is common for downtrends to become uptrends around retracement lines.  The big question is always which one.

• My simple interpretation of the weekly chart is that AAPL is in a strong uptrend.  There is even an accelerated uptrend in place.  If you want to go long (or add to your long) you should try to do it after a bounce off an uptrend line or when a downtrend line breaks.

I showed you the Weekly chart of AAPL so I can show you the Daily chart. 

This chart starts at the end of the double bottom and ends at present day. 

 

 

This is a Daily chart of AAPL

• The daily chart is a little more erratic than the weekly but that is expected.  One thing to focus on though is that the Weekly and the Daily charts both show uptrends.  That is a pretty good indication that you are safe being long the stock. 

• There are many places you could have gotten into this stock after the double bottom.  The shaded green circles show you some of them.  All those shaded green circles show a downtrend line being broken.  And if you notice, they all lead to higher prices.  If UT 1 & UT 2 continue, there will be many more opportunities just like these. 

• Notice that I have drawn a red downtrend line beginning at the high on Thursday.  I drew it all the way down to UT 1 because it could take that long for the price to break the DT line if it is going to.  Based on what is happening with AAPL at the moment, I don't expect the price to even get to UT 2 before it breaks the red DT line.  But that is my expectation and it may have absolutely nothing to do with reality. 

• So how do I play this from here.  Well, first you should know that I took some profits on Friday.  The stock was following a VERY steep trend higher for 7 days.  Friday's price action fell below that steep trend so I took some profits.  The next place I will take profits is $545ish.  You can draw an UT line starting on 11/21 and touching the bottom of the next three candles.  It will be at $545ish on Monday and $547ish on Tuesday.  On Wednesday it will be at $550ish AND it will intersect the red DT line.  If apple breaks the DT line and stays above the UT line starting on 11/21, then we have a new and more accelerated UT line that has been formed.  These developments would be very positive for long investors.  If none of this happens then look for a bounce off of UT 2 or UT 1.  If it goes below UT 1 then then look for lower prices.  By the way, UT 1 is about $55 below the current share price.  That is about a 10% drop.  Do you really want to just jump in blindly and "hope" that the price doesn't go down 10% or more?  I sure hope not.

Base your investment decisions on the chart.  Trade (invest) what you see.  Not what you think, or feel, or hope, or ...    

Limit Risk & Protect Your Profits

 

Charts of KKD, PANW, & TWTR

• The first chart I want to show you is TWTR.  I wrote a blog post about this stock recently and you can find that post here :  http://trendlineinvestor.blogspot.com/2013/11/twitter-inc-twtr.html. 

Now that more time has gone by lets revisit the Daily chart of TWTR

• Changes to the chart : I moved the "H. Support" line down just a bit.  I added another horizontal line between the "Day 1 Low" and "Day 1 High" lines.  I also added the green uptrend line (UT) and the shaded box.

 

• How does all this change the outlook on TWTR?  The price broke above the downtrend line (DT) and continued higher. until Friday.  If you bought the break of the DT line you are doing fine.  Just realize that your UT line is about $3 below so protect your profits.  A drop to the UT line, from Friday's close, would be a 6% drop. 

 

• What does the shaded box represent?  I say it represents the next higher price range for TWTR.  If the UT line holds then the price will enter the shaded box.  Once it does that it should make it to the top of the box.  At least that is my near term target.  If the price drops below the UT line then it will probably test the "H. Support" line.  If it goes through there we have no history to guide us so be careful.  The UT line should be used to set stops and protect profits.  If it gets below there you should be out of your long so it doesn't matter how low it goes.

 

 

• The next chart I want to show you is PANW.  This stock has been around since late 2012.  It had a nice increase in price for about the first month.  Then something happened and it started going down.  I wrote a blog post about this stock too.  You can find that post here : http://trendlineinvestor.blogspot.com/2013/12/helping-fellow-investor.html

 

 

 

Now that more time has gone by lets revisit the Daily chart of PANW

•  You never know how long trends will last.  But the closer to the beginning you are able to get in, the longer you will get to ride it. The longer you are able to ride it the more money you will likely make.  So here is a long downtrend line that just broke.  Time to get in?  You could say that. 

 

• Lets talk about the green uptrend line (UT) that has formed recently.  It is your guide on the way up.  If you can make a little money and you have some room you may have to use some finesse on that line.  Feel free to adjust a trend line (finesse) if you are making money.  But don't alter your trading or investing plan. 

 

• If I was going to get into PANW right here I would set a stop for half my investment at 50.  I would set a stop for the other half at 48.  Another option would be to set a stop for a third at 50, a third at 48, and the remaining third at the DT line.  Today that DT line is about 46.  Your plan must be decided by how much risk you are willing to take. 

 

• Why $50 and $48?  Since the gap up on 11/26 and excluding Friday's candle, the tops of most of the candles is about 50 and the bottoms of most of the candles is about 48.  Use a cross hair pointer on a daily chart and you too will see it.  Or just use a ruler, held horizontally, against your monitor.  You can be a cave man if you want to...

 

• I have to say I like the developments over the last week.  If things continue on this course, I expect the price to make its way into the shaded rectangle.  Notice it's the day 1 range.  The day one range is key for an IPO.  Let's see what happens from here.

 

 

 

 

 

The last chart I want to show you is KKD.  I am only showing you the last 6 months of activity.  This stock is tough to understand.  It does great between earnings but horrible upon the actual announcement.  Why???  I have no idea.  All I know is that there is a lot of money to be made if KKD responds to this earnings report as it did the last one. 

 

Let's take a look at the Daily chart of KKD.

•  Let's look at the last earnings report reaction.  There was no indication, on the chart, that things were going to go badly after earnings.  But if you were long this stock you had a rough week after earnings.  Notice that UT 3 begins on the 5th day after earnings.  From then on you saw higher lows.  The first two down days after earning gave goals of price levels to achieve.  Notice that once the price broke above the lowest horizontal green resistance line, it broke above the next one the following day.  From then on it was a new uptrend line to follow.  Let's jump to this most recent earning release, look at that red candle below the uptrend line just before earnings.  That was a sign!  You had been following a trend line. Maybe you even adjusted your trend line (finesse).  But that red candle, closing below the uptrend line, was your chance to exit stage left.  Trend lines work if you respect them.  Adjusting them can be VERY dangerous to your investing account balance.

 

• Will KKD do the same thing this time?  I couldn't tell you.  Why did it react that way last time?  I couldn't tell you.  All I know it that there is a good opportunity to play KKD with very low risk and a pretty clear history.  Now, will the past predict the future?

 

• KKD closed Friday at about $20.  The horizontal green line in the most recent shaded rectangle is the "low so far" after this earnings report.  The nice thing is that the low and the close are very close to each other.  This means not a lot of risk before finding out if your thesis is wrong.  This is called a "low risk trade". 

 

• Let's say you go long here at $20.  If that was a bad decision you only have $0.40 of downside before the chart tells you so.  The price needs to stay above $19.57 if it's going to go sideways or go higher. That's only a 2% risk.   You could limit your risk even more by realizing that Wednesday's candle was inside Tuesday's candle.  Thursday's candle was inside Wednesday's candle.  And Friday's candle was inside Thursday's candle.  This is cool but it has to change at some point.  The theory is that if an inside day is broken to the upside then price should go higher.  If broken to the downside then price should go lower. 

 

• So how do you begin an investment or trade in KKD?  You could go long when the price closes above the last inside day's high or go short when the price closes below the last inside day's low.  If you go long, your stop could be $19.50ish.  If you go short your stop could be $20.50ish.  That's the top of the 2nd & 3rd days candles.  Once it closes above there it will probably go higher.

 

• I will be watching this stock pretty closely.  As I said on the chart, "I love Krispy Kreme Donuts."  And although I would love for them to succeed, I am not going to invest or trade with only my taste buds.  Trend lines make much better guides when it comes to investing.