In order for the market of stocks to bottom, the leading stocks in the market must bottom. This seven week consolidation has provided time for the leaders to form bases. My top 100 growth stock list shows a number of bases in progress. Many of these are not the best looking charts. But I do see the better stocks holding up well against the market on down days and many near 52 week highs.
Using Apple Computer (AAPL) as an example, I see bases building at logical places in price and time. AAPL is not the best example of a leader, but it does show a base forming which began as a major time cycle hit. I’m using it because so many readers loves them some AAPL and expects it to control the world some day.
Price stopped at the October 10th market cycle point and is moving toward the 2×1 ascending Gann angle. Price is slightly below the 50% price line, but above the 5/8 level. This is not a bullish position but the 5/8 line is an acceptable place for a bullish retracement to run.
The range from 2006 to the 2007 top shows price at a 3/4 retrace and basing. The problem with this pattern is it looks like a clear 1-2-3-4 wave formation. A breakdown for wave 5 would at least test the 7/8 retrace level and could go all the way to the 2006 low. It is not a certainty that price will break down from here. But the pattern is clear. A consolidation of a few more 1/8 time cycles would provide a better bullish setup.
Examining the range of the 2007 high to the recent low, we see price is at the 1/8 time cycle. A move up or down is not unexpected at this time cycle. One positive thing about this chart is that price held up well until everything got hit in late September. A significant portion of the move down was at the 1×2 angle.
The May to October range shows the 1/4 time cycle hitting today. Symmetry of the 1/8 and 1/4 time cycles hitting on different time frames shows that the charted ranges are significant.
The take away from this may not be satisfying for those who want a magic bell to ring to tell them when to get in. My take is that AAPL could be basing and be ready for a move up. The basing action of a leader supports the case for a total market move up at some point. But with the 1-2-3-4 pattern since 2007, I would not be very aggressive on the long side until price of both AAPL and the market show me the trend has changed. The longer AAPL bases the more interested I will become in the charts.
Tags: AAPL · Gann Angle Fan · Growth Stocks2 Comments
2 responses so far ↓
Thanks for this work Andy. This could turn into a Reverse Head & shoulder formation I guess too. Libby, Thanks for your thoughts, they are well appreciated. Please keep them coming.
A few thoughts of mine for today:
the generals of the last bull market usually are last to bottom. I am not expecting AAPL and GOOG would be next bull’s leaders but could be wrong. YHOO, AOL, MSFT, INTC, etc did not lead in last Bull market, but maybe GOOG and AAPL would be different?
If the generals of last bull are last to bottom then it makes sense why less issues go lower while markets does since they are the heavy-weights and affect it most.
Many other stocks could have bottomed already we just have to find them. The leaders of next bull might be lurking out there? Maybe a Renewable Energy stock? Robot company?
It would take me by surprise if a bull market is to start tomorrow or anytime soon. However I see tha the bears and shorts are getting too comfy they are not even worried about a bear rally as of late
The gamblers started entering on short side just as in a late stage of a bull leg up.
With internals since OCT 10th to date not making a lower low, the markets only go lower because some heavy weights have not bottomed yet.
Last October when markets hit tops, GOOG, ISRG, BIDU, AAPL and RIMM and few others kept on going like nothing have happened.
I could be wrong but I am still somewhat long for short term. My few stocks are holding well above their lows in a basing format. Will dump any that breaks any rules; Will sell some when markets hit upper trading range line.
bests to all here.
Ray - Good stuff. I agree the new leaders will not be the old leaders. Although a few may be. The biotechs look good. Probably stems cell stuff and other stuff that Obama will let outta jail.