Saturday, June 14, 2008

AAPL, another study of EEDT and initial 3RV (three rising valley) study.

One of the posters on Ihub asked for some input on AAPL recently. When I looked at the chart, I realized that a double top was forming similar to FWLT.

Confirmation: First the price was trending upward before the formation commenced. There are two peaks, with the price difference between them 1.19%, which is within our 0-3% variance. The valley is 10.52% lower than the highest peak, which is within our 10-20% range for the valley size. Most importantly though, per the Encyclopedia of Chart Patterns the pattern is not confirmed as an Eve Eve Double Top (EEDT) until it closes below the confirmation price of 172.00.

On Friday, we did dip below that price of 172, even dipping as low as 165.31 at one point. However our closing came in at 172.37, so by the strictest of definitions this pattern has not yet confirmed. I'm not buying calls at this point, though, as if the market turns down again on Monday we could confirm at that point. Basically, as I see it this one is in for a good sized move from here, we just wont know which way until next week.

Highest peak is 192.24. Using that and our confirmation of 172 we can calculate the target if the formation confirms.

192.24-172.00 = 20.24/2 = 10.12
172-10.12 = 161.88.

Our target of 161.88 is very near the 200 day moving average of 161.05.


If this stock confirms, one play would be a short sale or put play to the 161.88 target area. There is very mild resistance at 167.70.

If this pattern busts or doesn't confirm a couple of things could happen. Either way, a call would be in order though. If we start moving upward, we will either meet resistance at or go through our peak at 192.24. If we see a white candle forming tomorrow, and can get in between 175 and 180, we could see a return of 6.80% to 9.85% if we have to sell at the 192.24 level. However, on average, busted double tops see a 70% gain on perfect trades, which would put our price target at 292.40! We have 3 areas of resistance to break through, but once we are through 200, there is nothing stopping AAPL from rising.

In fact, if you take a look at the lifetime chart on AAPL on a monthly basis, it has been downright parabolic, and from what little reading I have done on the three rising valley chart, this stock will continue to fly if it can break confirmation of 202.96.

If we do the measurement calculation for AAPL based on the 3RV formation, we get an even higher target price of over 370! Granted it will have taken several years for that formation to confirm, so my assumption is that it would take several years for that target to be reached. All in all though, if we can confirm with a close over 202.96, AAPL would have to look like a great addition to anyone's IRA.


Always perform your own due diligence before making any investment.

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