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Apple Inc (AAPL) closed Wednesday, Jan. 6, at $126.60, down 4.6% so far in 2021. The stock set its all-time intraday high of $138.79 on Dec. 29 and is down 8.8% from this high. Apple is also in a bull market over the past 52 weeks. It’s up 138.2% from its March 23, 2020, low of $53.15. The stock has been trading back and forth around its quarterly pivot at $129.97 for each day of January so far.
Apple was founded on April 1, 1976, and is based in Cupertino, California. The company develops and offers computer software, online services, and consumer devices such as the ever-popular iPhone. Recently, there have been discussions about the building of an Apple automobile.
The tech giant has beaten earnings per share (EPS) estimates in 16 consecutive quarters. The stock is not cheap, as its P/E ratio is elevated at 39.7 with a dividend yield of 0.63%, according to Macrotrends. Here’s how to trade Apple stock using daily and weekly charts.
The daily chart for Apple
The daily chart for Apple shows that the stock has been above a golden cross for more than 52 weeks. Notice that the stock is well above its 50-day and 200-day simple moving averages (SMAs), now at $122.12 and $101.98, respectively.
The stock was a buy between March 16 and April 6, when it traded back and forth around its 200-day SMA, then at $62.84. The stock rallied to a high of $137.98 on Sept. 2 and then declined to $103.10 on Sept. 21. The rebound from this level tracked the stock to its all-time intraday high of $138.79 on Dec. 29.
During the first full week of 2021, Apple stock has been trading back and forth around its quarterly pivot at $129.97, which is the highest of three horizontal lines. Above the chart is its monthly risky level at $152.12. The downside risk is to the lower two horizontal lines. The semiannual value level is the middle horizontal line at $114.04. The lower line is the annual value level at $97.31.
The weekly chart for Apple
The weekly chart for Apple is positive, with the stock above its five-week modified moving average of $125.50. The stock is well above its 200-week SMA, or reversion to the mean, at $59.84.
The 12 x 3 x 3 weekly slow stochastic reading is projected to rise to 79.37 this week, up from 78.37 on Jan. 1. It is nearly overbought, with the overbought threshold at 80.00 on a scale of 00.00 to 100.00.
Trading strategy: Buy Apple stock on weakness to the semiannual and annual value levels at $114.04 and $97.31, and reduce holdings on strength to its monthly risky level at $152.12.
How to use my value levels and risky levels: The closes on Dec. 31, 2020, were inputs to my proprietary analytics and resulted in new monthly, quarterly, semiannual, and annual levels. Each uses the last nine closes in these time horizons. New weekly levels are calculated after the end of each week. New monthly levels occur after the close of each month. New quarterly levels occur at the end of each quarter. Semiannual levels are updated at mid-year. Annual levels are in play all year long.
My theory is that nine years of volatility between closes are enough to assume that all possible bullish or bearish events for the stock are factored in. To capture share price volatility, investors should buy shares on weakness to a value level and reduce holdings on strength to a risky level. A pivot is a value level or risky level that was violated within its time horizon. Pivots act as magnets that have a high probability of being tested again before their time horizon expires.
How to use 12 x 3 x 3 weekly slow stochastic readings: My choice of using 12 x 3 x 3 weekly slow stochastic readings was based upon backtesting many methods of reading share-price momentum with the objective of finding the combination that resulted in the fewest false signals. I did this following the stock market crash of 1987, so I have been happy with the results for more than 30 years.
The stochastic reading covers the last 12 weeks of highs, lows, and closes for the stock. There is a raw calculation of the differences between the highest high and lowest low versus the closes. These levels are modified to a fast reading and a slow reading, and I found that the slow reading worked the best.
The stochastic reading scales between 00.00 and 100.00, with readings above 80.00 considered overbought and readings below 20.00 considered oversold. A reading above 90.00 is considered an inflating parabolic bubble formation, which is typically followed by a decline of 10% to 20% over the next three to five months. A reading below 10.00 is considered too cheap to ignore, which is typically followed by gains of 10% to 20% over the next three to five months.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.
