Thursday, January 11, 2007

Chart: AAPL

I know we've all had AAPL overload for the past few days, but this stock cannot be ignored. After undergoing a brutal shakeout, today the stock obliterated it's recent all time highs. What's not to like? The stock gapped up over resistance, closed at the day's highs on nice volume and the MACD indicator has turned positive for the first time in over a month.

Normally, I would jump in right here. However, two things concern me. First, RSI is showing a bearish negative divergence in price. Take a look at the big arrow in the chart below. Hot stocks have a tendency to ignore divergences (which is why I always wait for confirmation before shorting a divergence), so I wouldn't worry too much here. When a stock breaks out on nice volume and with long bars, I usually ignore the divergence. However, it still should be noted. Second, the stock is nearing the $100 level. I usually like to wait until the stock clears a major round number, as profit taking is likely as the stock nears the number.

Because of these concerns, I'm not going to jump in just yet. I'll wait to see how the stock handles the old highs and the $100 level. If the stock pulls back to $93 and then starts back up on nice volume, I'll make an early, aggressive play. If not, I'll wait for a breakout over $100.

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