Thursday, January 24, 2013

In commentary this morning concerning Apple's latest plunge, I alluded to a possible Mother of All Bear Traps in the Dow Industrial Average.  You should check out the DJIA chart in today's line-up, since it shows not only where the top might occur, but the precise location of a lesser one in the S&Ps that I've been drum-rolling recently.  The foregoing implies that the broad averages are capable of moving higher regardless of what Apple shares do.  You should allow for the further possibility that Apple, with a 447.55 worst-case target, is either at an important bottom or close to one, and an upturn in the stock could help buoy the market in the weeks ahead.  You can also click here to sample Rick's Picks free for a week.

The monthly chart shows the 14970 target that I alluded to in today's commentary as a possible terminus for the Mother of All Bear Traps. Although the futures have grown heavy in the C-D phase of the current bull cycle, it was to be expected, since they are taking the measure of the U.S. stock market's all-time high. Even so, you've got to respect the pattern, which consists of a very legitimate impulse leg and three single-bar coordinates.  You should take note as well of the 14098 target of a lesser pattern. I included it because it would seem to coincide very closely with the 1548.25 rally target I've proffered for the E-Mini S&P.

Apple's after-hours dive has overshot our 461.64 target by more than $4 -- presumably enough to imply that an alternative target at 447.55 is likely to be achieved.  That's a back-up-the-truck spot for buyers as far as I'm concerned, but there's always the risk that AAPL will turn rabidly higher from somewhere above it. To avoid missing the opportunity, camouflageurs should use the one-minute chart (see inset) to identify a serviceable pattern with an 'x' entry trigger. For your guidance, I've labeled just such a pattern to show you how subtle that signal might be.  ______ UPDATE (10:35 a.m. EST):  Sophisticated algorithms aside, the sleazeballs who work this stock clearly rely on round numbers to ply their dubious trade. In this case, they have turned AAPL higher from $450, since the next stop would have needed to be $400.  This tactic proved pre-emptive of my $447 target, but not by much.  As a practical matter, we've given up on the idea of bottom-fishing with camouflage this morning, since ostensibly tradable patterns on the one-minute chart were yielding entry risk of close to $2 per share. We had been prepared to accept risk closer to about 20 cents per share. _______ UPDATE (January 24 at 8:09 p.m. EST):  In after-hours trading Thursday night, AAPL has traded down to 447.36, but there has been no bounce to speak of -- only an uptick to 448.03.  Under the circumstances, the 447.36 bottom must be regarded as extremely fragile.  If you are long based on the tout, deploy a stop-loss at 447.19 until such time as 454.51 is hit. (That would generate a bullish impulse leg on the lesser charts and provide some breathing room.) Take a partial profit there, but save some shares so that you can swing for the fences with at