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Apple Rally Not Sustainable: Charts
CNBC.com | March 06, 2012 | 06:23 PM EST

The Apple chart shows an unsustainable rally. This doesn’t mean that traders cannot make money, but it does suggest that investors buying in the current market will have to ride a short-term loss before the long-term trend carries them into profit.

Buyers at the $550 level and higher are most likely to see a substantial retreat back to the upper edges of the long term trading channel, current value near $460.

Chart analysis of the Apple price action is designed to answer several questions.1) The price objectives for the rally2) Near term price behavior3) The stability of the trend

The first feature of the Apple weekly chart is the well-established and stable trading channel. This is defined with an upper and lower parallel trend line. The lower trend line has been tested several times as a support level. The upper trend line has been tested many times as a resistance level. The normal behavior of Apple has been to trade inside this trading channel. The general trend is upwards, but it consists of rallies and retreats inside the trading channel.

Contrast this usual behavior with the rapid breakout above the upper edge of the trading band in recent weeks. This is a fast moving rally. It is not the beginning of a new and steeper uptrend. The targets for these types of breakouts can be estimated by projecting the width of the trading band upwards from the point of the breakout.

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