It will be interesting to see if AAPL (Apple Inc) wows the public next month with the widely expected larger iPhones, this oversized iPad or any other tricks it may have up its sleeve because the chart on AAPL is starting to look ripe for a correction. Besides this steep rising wedge with bearish divergences building on both the RSI & MACD, as this chart clearly illustrates, such overbought clusters on the RSI, such as those recently put in place, have traditionally preceded significant corrections in the stock (dashed red arrows). Along with AAPL, several of the charts from the Live Charts page were updated last night including all of the Market Leading Stocks (AAPL, XOM & CVX) as well as the Sector ETF charts.
I often like to publish a technical overview of the top components of an index or sector that may be setting up for a nice move as analyzing the charts of the most heavily weighted components will often give you a heads up on where the index or sector may be heading. Normally I will use a video format as it allows me to discuss all the nuances of the chart as well covering charts of the same stocks on multiple time frames. Today I’ve decided to simply post one chart of each of the top 10 largest components of the S&P 500 index.
Although my primary focus has been on the Nasdaq 100 lately, I have been intrigued by the resiliency of the less tech-heavy S&P 500 and like most traders, I have been trying to discern if the $SPX will soon begin to play catch-up to the $NDX on the downside or vice versa. As I always strive to keep my analysis as straightforward and unambiguous as possible, I will state that my expectation at this time is that the $SPX is poised to start playing catch-up to the $NDX & $COMPQ by moving lower. Below are the charts of the top 10 components of the S&P 500 listed in descending order by their current weighting in the index. Although I can’t discuss all of the details of each stock on a single time frame static chart, I’ve tried to highlight the most salient technical developments of each of these market leading companies. Click on the first chart to expand & then click anywhere on the right-hand side of the chart to advance to the next chart.
Just to elaborate on my previous market comments, any bounce that may or may not materialize around the current support level on the Nasdaq 100 is expected to be a counter-trend rally in what I still believe to be the early stages of a much larger downtrend. Today the $NDX hit the first of four downside profit targets that have been listed on the $NDX live daily chart for some time now. My expectation at this time, which could change depending on how the charts play out going forward, is that before all is said & done, the $NDX will have fallen to my 4th & final (at this time) target which comes in around the 3150 level or the primary uptrend line on that chart, whichever comes first. That could take as long as several months or a short as several days, should the nearby support levels give way quickly.
With that being said, in order to most effectively utilize the trade ideas on RSOTC one must align the entries & exits of those trades with their own unique trading style and typical time frame. For example, very active, short-term traders like myself might opt to micro-manage a swing trade listing multiple price targets by booking profits as the earlier targets are hit (assuming the short-term charts confirm that a bounce is likely) while re-entering the position on the bounce with the intention of swinging the trade down to the final target(s). A less active, longer-term swing or trend trade might opt to ride out any short-term counter-trend bounces in the position with the intent of holding out for the 3rd or 4th target.
The bottom line is that trying to time all the minor swings in the market is not always easy and typically something best attempted by more seasoned traders. Those traders or investors that are longer-term bullish at this time should focus on initiating or adding to positions on pullbacks to support or breakouts of bullish chart patterns. For example, I’ve recently highlighted how well the 40-week EMA has defined major bull and bear trends in AAPL (Apple Inc.). After breaking down from the recently highlighted symmetrical triangle pattern on the daily chart, AAPL has now fallen to the 40-week EMA (which is the same as the 200 EMA on the daily chart), thereby offering an objective long entry, again for those who believe that the current correction has most likely run it’s course. Those with a longer-term bearish view could wait for a solid weekly close or two below the 40-week EMA in order to establish a swing short position on the stock.
Again, we may or may not get a tradable bounce in the $NDX from this current support level and as such, I plan to update some of the trade ideas that still offer an objective entry for those looking to add any long or short exposure at this time. As I might be updating a number of trade ideas today, email notification may not be sent out on each update so best to check the site throughout the day or over the weekend if looking for any trade ideas at this time. On a final note, for the most part, I try to avoid establishing any new positions on a Friday, especially towards the end of the day due to the extra overnight risk associated with weekends. Based on all the volatility lately, chances are that the market is going to gap one way or the other on Monday and that gap could be sizable.
AAPL (Apple Inc) is currently trading well below the symmetrical triangle. First downside target would be the 200ema/515.60 area. click here to view the live daily chart of AAPL
Also keep in mind that the 200-day EMA, which is the same as the 40-week EMA, has done an excellent job of defining major bull & bear trends in APPL in recent years as evidenced on this 10-year weekly chart. click here to view the live weekly chart of AAPL
I’ll be watching AAPL (Apple Inc.) closely over the next few trading sessions as the price of this market leading stock is quickly closing in on the apex of this symmetrical triangle pattern. The downtrend line of that pattern is generated off of the Dec 5th peak in AAPL which came just two trading sessions before the AAPL Looking Increasingly Bearish post in which a detailed case was made for a correction in Apple. From that Dec 5th peak, AAPL fell about 13% (same percentage drop as the previous overbought cluster that was highlighted in that post).
Since the Dec 5th peak, AAPL has been trading in a contracting price range, i.e.- a symmetrical triangle pattern. Such patterns often prove to be continuation patterns with the stock breaking out in the direction of the previous trend. However, triangle patterns can break either way and it’s also not uncommon to see an initial “fake-out”, with prices breaking in one direction only to reverse and continue moving in the opposite direction shortly thereafter. Personally I have no interest in taking a position in AAPL regardless of which way prices move from here but as the world’s largest publicly traded company & the largest weighted component of both the S&P 500 and Nasdaq 100 Indices, it would be prudent to keep eye on the stock over the next few weeks.
The SPY/$SPX continues to consolidate above the T1 support zone and will likely move lower over the next few trading sessions. Any break below yesterday’s low (which was right around the 38.2% fib retracement level) should open the door for a quick move down to the T2 area or lower. However, as I like to say: Support is support until broken. Therefore, shorting or adding to short exposure around current levels would not be objective. Best to wait for a break below yesterday’s low IMO, which is less than 1% below current level. Those who are near-term+ bullish could certainly take a shot at adding long exposure on or slightly above the T1 level with stops just slightly below yesterday’s lows but again, the most bullish of my current scenarios (my alternative scenario) remains a possible move higher (which could last several days to a couple of weeks) to backtest the recently broken uptrend line on the $SPX daily chart with prices turning down from there. My preferred scenario remains a continuation of the short-term downtrend to resume shortly with the SPY heading towards the 175 area.
As previous highlighted, both AAPL & XOM recently failed on their attempt to regain the former support, which became resistance once broken. Since the backtest of their respective broken support, now resistance levels, both have turned lower as expected with XOM already hitting my next downside target immediately following the open today (and as expected, has bounced since). I will continue to monitor the charts of XOM & AAPL closely as they are the two largest components of the S&P 500 as well as the two largest companies in the world (as measured by market cap). As such, XOM & AAPL are likely to act like a ball & chain hitched to the broad market if they continue to underperform.