The recent general market weakness in U.S. stock indices has been spearheaded by former market leader Apple (AAPL) since the stock topped out back in the 3rd week of September.
Prior to that, readers who follow me on Twitter saw several charts that I posted back on September 3, and then on September 11 that showed divergences in RSI. These divergences do not always work, but they are one early warning sign that a change in trend may be soon forthcoming.
Here is the chart from September 3. As you can see I had a box highlighted in light green that showed an area where I anticipated the stock would find support.
Click on chart to enlarge view:
The second chart posted on September 11 was an intraday chart over a span of 20 trading days which showed the same divergence in RSI.
The current chart shows that the area I highlighted in the first chart was undercut but by roughly 30 points based on today's intraday low so far today. This relentless selling pressure, coupled with the way the stock knifed through its 200 DMA shows extreme weakness. Sellers want out and they don't care about moving averages or zones of support; they just want liquidity.
Here's an updated current chart:
Given the severity and swiftness of the decline over the last 7 1/2 weeks, I would be a seller (if you haven't sold already) on any bounce back to the high $580s to low $590 area. This stock has been "over-owned" and every money manager's favorite stock to buy during this bull market.
Stocks that move this far this fast can be great if you're a nimble short term trader and/or options player. But most investors who take a longer term approach should be cautious on the long side until the stock settles down and forms a new base.
Prior to that, readers who follow me on Twitter saw several charts that I posted back on September 3, and then on September 11 that showed divergences in RSI. These divergences do not always work, but they are one early warning sign that a change in trend may be soon forthcoming.
Here is the chart from September 3. As you can see I had a box highlighted in light green that showed an area where I anticipated the stock would find support.
Click on chart to enlarge view:
The second chart posted on September 11 was an intraday chart over a span of 20 trading days which showed the same divergence in RSI.
The current chart shows that the area I highlighted in the first chart was undercut but by roughly 30 points based on today's intraday low so far today. This relentless selling pressure, coupled with the way the stock knifed through its 200 DMA shows extreme weakness. Sellers want out and they don't care about moving averages or zones of support; they just want liquidity.
Here's an updated current chart:
Given the severity and swiftness of the decline over the last 7 1/2 weeks, I would be a seller (if you haven't sold already) on any bounce back to the high $580s to low $590 area. This stock has been "over-owned" and every money manager's favorite stock to buy during this bull market.
Stocks that move this far this fast can be great if you're a nimble short term trader and/or options player. But most investors who take a longer term approach should be cautious on the long side until the stock settles down and forms a new base.
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