AAPL Bearish Divergence
By Johns Wu on Jun 10, 2006
I offered my bearish opinion on AAPL, Apple Computer Inc., a few weeks ago. AAPL stock continues to struggle in this short-term bear market.
I don't like how the OBV has been making lower highs while the stock itself has been contained in a fairly flat consolidation channel. This is a bearish divergence and offers a clue about "smart money sentiment" on AAPL.
OBV is based on the theory of "volume precedes price", so the fact that AAPL is making new lows on the OBV is a technical sell signal. Consequently, a breakdown below $57 would be a low-risk short entry since "support becomes resistance".
2 Responses to “AAPL Bearish Divergence”
Yes but there is a bullish divergence in the CMF. CMF is a much more modern version of OBV and it accounts for gaps. OBV missed the giant gaps that pushed AAPL to the top of it’s range and thus appears to be declining against that rally.
CMF was very negative at the previous low, but on the second fall has been less negative. This indicates to me that smart money is quietly accumulating AAPL.
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I think that for now you had better left it alone until the next attempt to break the $57 support. If you want to be proactive draw a line from the peak at 86.40 to the 73.80 and that can be used as a point to short it - but until then be less aggressive I guess. I think that it is very hard to be proactive in technical analysis - until you see some kind of a confirmation, you cannot place you bets ( and it can take some time to confirm your prediction which is very frustrating some time - so why not wait for the confirmation moment and then pull the trigger ?). For me technical analysis is only about being reactive - follow other people and not predict anything - which is proactive I guess ).