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As I have detailed repeatedly in recent posts, the initial target for AAPL on this move down off the fall high was the low of the previous base around the $525 level. On Friday we saw a big swoon below that level on high volume followed by a reversal to close above the old base low.
The candlestick was a very high volume and wide ranging hammer type candlestick. It is not uncommon for an immediate reversal higher after a break of a major low like that. Understand what is going on in the market at that point......Obviously many standing sell stop orders would be placed below that low based on chart support for the major uptrend. So the market will typically push through those points where many orders accumulate to "wash out" the stops before reversing. And obviously there will be some smart money placing orders to buy just under or at where those last ditch stop orders were placed.
So the bulls took control and pushed the stock higher. Given that the markets are oversold on the daily chart time frame, I think we may see a multi day rally attempt from this point in the general market averages.
But in the case of AAPL, if the stock does rally from here but later fails and breaks to new lows, that would be a major failure for the stock and may lead to a continuation down. On a short-term note, those wide range hammer candlesticks have about a 60% probability of future prices moving BELOW the mid point of the tail on the hammer even if the reversal holds. Given the possibility of a significant rebound attempt in the stock, a set up like that can be followed intraday as prices move back into the tail region and then any upside reversal signals can be taken as long trades and often create an outstanding reward/risk opportunity.
When stocks that are heavily owed by institutions (as AAPL obviously is) top out, they can lead to some sloppy price action and volatile, choppy price moves as the topping process unfolds.
The general markets are not yet showing the typical bullish divergence on a daily frame that is typical of most corrective bottoms. So I think we may be in store for a rally attempt for several days, followed by new corrective lows before a possible more sustained advance or rally attempt.
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