The general markets pulled back on lower volume as they continued to consolidate recent gains. The last three days of market action following last Wednesday's massive gap-up move have been constructive as the indexes appear to be forming a tight flag on their daily charts. With tax increases a known factor and quantitative easing in full force, uncertainty is less of a factor, so the uptrend could continue despite the fact that many have a hard time believing it.
Apple (AAPL) looks like its trying to put in a sort of "Wyckoffian" low in Monday's action and so we would consider staying away from the short side of the stock pending either a) a rally back up towards the 50-day moving average or b) a clean break of the neckline at around $500 as a downside "breakout." A "Wyckoffian" low is simply a situation where a low is put in and a rally ensues, followed by another pullback that occurs on lighter volume - essentially a pattern of higher lows with each pullback low occuring on lighter volume, a sign that potentially selling pressure is dissipating in the short-term. A logical reflex rally up to the 50-day moving average, currently at 553.46, would still be consistent with the overall H&S formation that AAPL is still trapped within, and it is possible that a final resolution to this pattern, either bullish or bearish, will not occur until earnings are announced on January 23.
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