SSS - The Apple (AAPL) Mosh Pit, Part Deux

Published : January 10 2013 at 11:07 ET

This morning in our Pre-Market Pulse we noted the 2% gap-up in AAPL shares pre-open that in fact took the stock beyond the 531 level, the same place it found resistance three days ago. This is a fluid and fascinating situation here, and we think it bears watching as a high-volume reversal in AAPL could send the stock towards the $500 level, where the neckline in its Head & Shoulders top formation lies.

While it would be "logical" for AAPL to rally with the market in a continued upside index trend, it woudl also be logical for AAPL to lead a market reversal, which it appears to be doing as the NASDAQ Composite turns red here just after 8:00 a.m. Pacific time. As well, the indexes have broken out of a short flag formation, which is bullish action on its face, but less than 2 hours into the trading day we are seeing some selling into the rally and a mini-reversal thus far. Whether this carries through to the downside remains to be seen, but we think AAPL bears watching in this regard. If the market were to reverse course here on a "breakout and fakeout" type of move, we would expect AAPL to push lower in rapid fashion.

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