Monday, May 19, 2014

"Produce - Aisle 3"

With Apple reaching the upper bound of our estimated target range this morning, we are clearing the produce aisles of remaining inventory. While our long-term expectations still remain favorable, we anticipate another consolidating sweep lower to materialize over the coming weeks as the stock has made its way back to long-term trend performance - and as momentum appears vulnerable to exhausting at the top of its range. 
As we described in our previous note on Apple (see Here), we have used the historic momentum comparative with oil as a mean reversion template of similar market character. Today, Apple has made its way back to its linear regression trend line, that from a long-term perspective is a bullish benchmark and testament that the final chapters in its illustrious growth story have yet to be written. Even more impressive when one considers the magnitude of its growth - as exemplified in its steepness of slope.

With that said - and as shown below with the regression profile for oil fitted to the slope of Apple today, we expect another consolidating sweep lower as the regression lines have served as the upper limits of the respective recovery range.

For further reading on this concept - see some of our previous Apple notes: