It's important to keep perspective during this AAPL correction. We have been down this path before and the market is very clever at fooling most of the people most of the time. We saw a very similar pullback in 2013 just like we're seeing here, and what happened when that pullback ran it's course was AAPL went on an absolute tare rallying more than 85% higher in a little over a years time. We're not saying that AAPl will follow the same exact pattern, but history does serve as strong technical lesson to give you an insight in what's possible. In fact, much of technical analysis is built upon historical impressions. Let's take a look:
First off, let's isolate our variables and compare the AAPL 2012-2013 crash to the 2015-2016 crash.
AAPL 2012-2013 = Declined -44% in 9.2 months
AAPL 2015-2016 = Declined -34% in 9.7 months
So to come out of a mess like this, it takes time. It doesn't happen in a few weeks or months for that matter. But it takes quarters of merit. Why? Because there are a lot of losers to the left of a massive decline who bought the stock much higher & many of them just want there money back. This is also known as excess supply. So it takes time for the chart to chew through all this supply. This is one of the reasons why a stock will struggle as it comes back from the dead. It's very rarely the case that we a stock will do a complete V-Recovery, especially after such traumatic impressions plague a stocks technical picture. Look back at post .com, financial crisis, the AAPL 2012 & 2015 crash and you'll see that each recovery took a great deal of time. The point is, we expect it and will model trades that can comfortably take advantage of choppy turbulence as AAPL makes it's way to more comfortable altitude where the air is thinner.
Back to this particular pullback...it's important to distinguish that this pullback still looks an awful like that of 2013. In fact, right here we're getting near the same identical pullback levels that occurred in 2013. If we just compare the sentiment and technical/price action that occurred in late 2013 when AAPL was coming out of a massive year long crash, to the sentiment in this current pullback what we see is there was a multi month rally off the bottoming lows...then a rally that petered out and retraced up to 61.8% of the entire rally.
In Fibonacci retracement analysis, we find that statistically the most common area for a rally to retrace usually occurs from the 38.2% to 61.8% retracement. We call this area the Fibonacci Retracement Zone (FRZ) also known as FRZ.
So AAPL pulled back to the 61.8% retracement zone back in 2013 and it's just now hit that same level as well down here at the $105 area. Let's take a look:
Now good news is that this so far looks like a very typical correction. Apple is down a reasonable amount over a reasonable amount of time. Down -12% in about a month. Compared to -14% decline in 1.8 months in the 2013 pullback. So purely on side by side comparison, this suggests we may be nearing the end of this pullback sometime soon around early to mid December.
Yet considering that AAPL is at extreme oversold on the RSI daily it's all together possible this correction end sooner than later. Historically whenever AAPL has gotten as low as a 30-RSI reading we've seen a pretty strong recovery rally. Only in very few instances do we see the stock trickle lower and print even deeper lows on the RSI oversold readings. Notice today AAPL also filled the $105 gap we had been mentioning between $107 to $105.
So this main question is, is this time different? In 2013 AAPL pulled back -14% from peak to trough, bottomed out and went 85% higher in a years time. So the question is, is this time different. Is the AAPL pullback this time going to not hold and will we not see a similar rally that retests the highs & ultimately takes out those highs. The natural reaction is to point to this era being different because of a new Trump environment and the concern of China trade wars igniting some kind of degradation in AAPL sales revenue. That's a fair concern certainly. But as of now, we still have as of now a swarm of bullish indicators showing that the path of least resistance is to the upside on the monthly chart. A stochastics bullish crossover is not something you want to stand in front of on the short side, but rather it's where you want to be long. The sentiment in 2013 was just as bearish to cause this breakdown, but the long term trajectory was still bullish and so ultimately AAPL recovered those losses and made its way north when it was all said and done.
We expect the same thing to happen here. We will alert members if BotTrigger issues an official sell signal but as of right now, there is not enough evidence to trigger a formal sell alert. Quite the opposite in fact.