AAPL Close To Trendline and 50 Day MA Break

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This is a daily chart of AAPL.  There are several points of note here.  It is in a probable set-up for a break of its up trendline, which would likely lead to break of the recent base breakout at $620.  I have noted before that a failure of that breakout to hold is potentially longer term bearish.

First, look at the daily MACD.  It is showing bearish divergence between the spring highs and the current high.  The weekly chart also shows a sharp bearish divergence between those points.  Also, there is bearish divergence within the end of the recent leg up between August and Sept.  So there is a multiple time frame bearish divergence indicating waning momentum on a large scale.  I have already noted the volume divergence in a recent video.  The volume divergence is also present on multiple time frames.

Secondly, look at the pink uptrend line.  It has already been touched 4 times for support.  If it is broken that could signal a correction of the major uptrend for the last year.

Third, look at the 50 day moving average.  I have noted this type of occurrence before, but I will review it again as I believe it is an advanced chart reading concept.  At key moving averages like the 50 and 200 day MA's I believe program trading often leads to support and near immediate reversals when price touches them.  In a stable uptrend price will typically not come back down below the low of the moving average test area.  Also, the rebound off the moving average will often be strong with a gap up and increased volume.  However, as a trend is beginning to weaken, price may test the moving average and lead to an apparent reversal as program trading comes into the stock.  However, the rebound is often relatively weak compared to prior rebounds, and volume is often lower.  Then, if price fails to hold the 50 day average or the low of the recent test of the average, it can create a "breakaway" type point where the program trading support is gone and price falls rapidly.

So that is possible here as AAPL recently tested the 50 day MA and reversed off it creating a reversal candlestick.  However, the initial rebound has been relatively weak.  And price has now come back down to the 50 day MA and is threatening to close below it and below the low of the recent reversal bar.  Combined with the uptrend line in the same area, I think a close below the 10/2/12 low could lead to a breakaway move to the downside taking AAPL down probably to the recent base low around $520-530.

If that occurs, then it is obvious that the broad market is likely to experience a substantial correction as well.  So keep AAPL on your radar on Monday.