Anyone closely following the action in Apple’s chart in the last four days cannot help but observe an encouraging trade pattern: the stock’s trading in a narrow range with an upward bias.
Is it just a temporary rebound after a long correction or the beginning of an upward trend?
It is hard to say, as there are no corporate developments to support this technical move. In fact, the positive trading bias of the stock comes at a time of maximum pessimism over the prospects of the company. Equity analysts are rushing and racing to downgrade the stock—with one exception, today. Competitors like Samsung and BlackBerry are churning out new products; and investors are heading for the exits.
From a contrarian perspective, a narrow trading range with an upward bias at a time of maximum pessimism is a sign that the stock has bottomed -- the same way a narrow range with a slightly downward bias was a sign that the stock had topped a few months ago…a time of maximum optimism.
However, stock charts should be interpreted with caution; they confirm correlation rather than causality, and look in the rear-view mirror, assuming that the future is a repetition of the past. That’s too generous an assumption in the rapidly changing high technology universe.
Also read:
A Dangerous Sign for Apple's Stock
Will iPad 3 Boost Apple's Momentum?
Disclosure: Long on AAPL
