Thursday, February 22, 2007

Trade of the Day - Apple Inc. (Public, NASDAQ:AAPL)

AAPL gapped up on the open and immediately reversed. As it approached and tested its rising 10 period EMA and started to form a base, I was contemplating a long entry. However, a quick review of the 60 minute timeframe showed that the 10 EMA was still very far away and left me wondering if it could bounce from this level. As I waited for price to take out the third bar high on the 15 minute timeframe in order to complete the base, sellers came back in and drove price all the way down to $89.53 which ties in with yesterday's primary resistance level and the 10 EMA on the 60 minute timeframe. Notice that bars 9 and 10 on the chart above had identical lows of $89.53, forming a bullish reversal tweezer bottom candlestick pattern. I waited until AAPL formed a base and went long on the break. The base, as you can see on the 5 minute close-up below, coincided with a break of the 9th bar high on the 15 min. timeframe.

In order to determine a target level, I mapped out the Fibonacci retracement levels from the OR high to the low of the tweezer reversal bottom. I took a partial as price approached the 50% retracement level. After that it was a long choppy afternoon with the bears and bulls playing tug of war. AAPL managed to to rally a bit in the last half hour, but not before retesting the morning base and my entry point. Notice that we had a second tweezer bottom on the retest of the base.

Where to next for AAPL? Since AAPL has successfully tested former resistance as support and is close to completing a bullish base on the 15 minute timeframe, we can assume that it will continue higher. I've highlighted the upcoming resistance levels on the daily timeframe below for those interested in trading it in the coming days.

No comments: