Apple Stock Begins September in Inflating Parabolic Bubble

Apple Inc. (AAPL) enters September as a strong momentum stock, and the tech giant's shares set new all-time intraday highs for the last four days of August and on Sept. 4. The stock is setting high after high in anticipation that investors will like the new iPhones that will be presented on Sept. 12.

Apple shares closed August at $227.63, up a Dow 30- leading 34.5% year to date. Since trading as low as $150.24 on Feb. 9, the stock has posted a solid bull market gain of 51.5%. Apple set its latest all-time intraday high of $229.18 on Sept. 4 versus a weekly risky level of $229.42. (See also: Apple's New iPhones Will Boost Market Share: Canaccord.)

The daily chart for Apple

Daily technical chart showing the performance of Apple Inc. (AAPL) stock
Courtesy of MetaStock Xenith

The daily chart for Apple shows that the stock is not immune from technical corrections. From a high of $180.10 on Jan. 18, the stock slumped by 16.5% to its 2018 low of $150.24 on Feb. 9. When a stock is above a "golden cross," as Apple has been for quite some time, the trading strategy is to buy weakness to the 200-day simple moving average,  which was doable at $159.54 on Feb. 5. Another opportunity to buy weakness to the 200-day moving average occurred on April 23, when the average was $165.64.

The two horizontal lines in the middle of the chart are my annual pivot and semiannual value level of $176.57 and $181.73, respectively. Note how $176.57 was a magnet between Jan. 12 and May 3. The third quarter began above $181.73 as momentum began to heat up. This targeted my quarterly risky level of $210.60, which was a price at which to book some profits. Shares of Apple gapped above this pivot on Aug. 16.

The weekly chart for Apple

Courtesy of MetaStock Xenith

The weekly chart for Apple is positive but overbought, with the stock well above its five-week modified moving average of $212.03. The stock is also well above its 200-week simple moving average, which is the "reversion to the mean" at $133.36. Note how the "reversion to the mean" was a buying opportunity between the weeks of May 6, 2016, and July 1, 2016, when the average was $93.31.

The 12 x 3 x 3 weekly slow stochastic reading begins September at 93.55, above the 90.00 threshold as an "inflating parabolic bubble." As a reminder, the stochastics scale is between 00.00 and 100.00, and a reading above 80.00 is overbought, while a reading below 20.00 is oversold. A reading above 90.00 is a warning, as the stock has gone parabolic – below 10.00, the stock has become "too cheap to ignore."

Given these charts, investors should buy Apple shares on weakness to my quarterly, monthly, semiannual and annual value levels of $210.60, $207.69, $181.73 and $176.57, respectively, and reduce holdings on strength to my weekly risky level of $229.42. (For more, see: 'Apple Most Worrisome Among FAANGs': Paul Meeks.)

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