Apple (AAPL) reached the lower price target range that was established in this previous update:

Apple (AAPL) 10/28/2016 – Post-Earnings Analysis

That lower price target I mentioned was looking for Apple to correct to was the 200 Day moving average. I said “do not be surprised to see Apple re-test the support at its 200 Day moving average again before taking off”. The 200 Day moving average was around the $104 area at the time. Apple’s share price closed at $113.72 on the date of the above linked article. It subsequently reached a low of $104.08 during its pullback.

Now that its share price has started to rebound from the $104 area, let’s use some tools to estimate where Apple’s (AAPL) new uptrend is going.

Apple’s (AAPL) New Uptrend

The first tool I turn to for calculating upside price targets is the [s2If !current_user_can(access_s2member_level1)]…….If you want to continue reading this article, you must first sign in. Not a Trendy Stock Charts member? Then consider one of the subscription plans.[/s2If][s2If current_user_can(access_s2member_level1)]Fibonacci Extension Tool. This is a 2 year weekly candlestick chart which has the tool overlaid on its previous uptrend and subsequent pullback to the $104 area.

Whether you call it a Double Bottom chart pattern, a Cup with Handle Chart Pattern, or something in between, one thing is for certain – Apple’s (AAPL) new uptrend is in progress. Don’t believe me? Look at its 2 highest volume bars. Those above average buying volume spikes serve as 1 form of confirmation.

Analyzing Chart Patterns & Developing Expectations for Apple’s (AAPL) New Uptrend

The run from $93 to $118 represented the first of 3 upward legs of its new uptrend. This first leg of the uptrend can also be labeled as a wave 1 & 2 in a Bullish Impulse wave pattern. What usually comes next is the best part of a Bullish Impulse wave pattern – wave 3. And if you are lucky an extended wave 3.

As you can see, I’ve sketched out one possibility above. That is the more bullish scenario. But the one thing that holds me back from going all in with this scenario is simply the amount of time that has passed. And that is not enough time. The more probable outcome is the black arrows rather than the red that I illustrate on this next chart.

The Black Arrows Represent a Probable Zig-Zag Wave Pattern & Re-Test of the $102 Area

If AAPL’s share price cannot break above the $118.69 area during this current uptrend, the chances for a re-test of the $102 area are significantly increased. That would mean, follow the black arrows for trading success.

If APPL’s share price breaks above the $118.69 area, look to trim shares above $120 and closer to the $122 area represented by the 61.8% Target Line from the Fibonacci Extension Tool.

AAPL – Fibonacci Fan Tool

In addition to the Fibonacci Retracement Tool, the Fibonacci Fan Tool can also be used to look for pullback areas. But the Fibonacci Fan Tool usually adds an additional element to the pullback, the element of time.

How does a Fibonacci Fan Tool add an element of time to the pullback? Well, the best stock purchases are typically made when the share price breaks below the lower quadrant of the tool. This is a 5 year weekly candlestick chart.

Buying on a Break Below the Lower Quadrant Is Less Risky When Combined With Other Bullish Reversal Signals

The next immediate overhead resistance area is the area around the previous uptrend’s high ($118.69). If that resistance area is broken by strong buying volume through the end of the year and AAPL’s share price reaches the $125 area or above before earnings, that would be a good place to trim shares and lock in profits. Any repurchases would then be made under the $120 area and closer to the lower trendline of the Lower Quadrant from the Fibonacci Fan Tool.

The timing would be difficult, but I anticipate it to pull back and hit that area before earnings. I have a hard time believing the market makers are going to let Apple’s (AAPL) new uptrend continue into a larger breakout. It just usually doesn’t happen for this behemoth.

There is also going to be the issue of a lot of sellers in the $125 range and above, These sellers are people that have been sitting in their positions and will use Apple’s current strength to exit their position. This typically sets up another trading opportunity for short and longer-term investors.

Let’s look at it from a moving average perspective and see if that trading analysis agrees with that of the Fibonacci Fan Tool.

AAPL – Moving Averages

This is a 1 year daily candlestick chart for Apple. Looks like Apple’s share price developed a 3 White Soldier candlestick pattern over the last 3 trading days.

Analyzing a Daily Candlestick Chart Using Moving Averages & Candlestick Pattern Identification

Considering the support are for a 3 White Soldier candlestick pattern, I would then expect AAPL’s share price to bounce from the 20 Day moving average. That means purchase any pullback that falls into the $110-$112 range.

The support area for a 3 White Soldier candlestick pattern is between the closing share price from the 1st candlestick in the pattern and the opening share price from the 3rd candlestick in the pattern. For Apple, this support area is the range of $111.03 – $112.31. That is one way to calculate the repurchase zone for shares sold higher.

Apple (AAPL) – Summary

With Apple’s (AAPL) new uptrend at hand, being long until its share price reaches its previous high is the best course of action. It is also the least risky trade. For those wanting to flip some shares in between here and there and not wait for the least risky trade, consider selling some shares around the $118 – $122 area and look to repurchase those shares in the $115.50 area.

In the case of an earnings disappointment, which I do not anticipate, the downside risk for AAPL’s share price is the $100 – $102.50 area. But that would be a violation of the support area from the 3 White Soldier candlestick pattern, again something which I would not anticipate or expect. Apple’s upside target price? That is the $151.36 area represented by the Golden Ratio from the Fibonacci Extension Tool (the Golden Ratio is the 161.8% Target Line).

Use the upside potential of $151 and the downside risk of $100 to calculate the risk to reward ratio. A ratio of 1:3 is preferred. With Apple’s closing share price of $113 and change on Friday, its risk to reward ratio is approximately 1:3.16; I calculate that by taking the downside risk of $12 . 

Consider a pullback to the $102 area is only a bonus buying opportunity, not something to worry in regards to a larger pullback. That is an added layer of comfort in this trade. Do you really think Berkshire Hathaway is going to let their investment go under-water below the $102 area while the majority of the market is moving higher?

If you like safety as well as opportunity for growth, Apple’s charts are setting up to deliver. There will be higher potential, it appears, in smaller cap names. With higher risk comes higher reward. Is Apple’s reward outlined above enough for you while remaining relatively safe? If so, print this article and monitor its activity and begin to enter into your position.[/s2If]