This column was originally published on RealMoney on June 6 at 12:02 p.m. EDT. It's being republished as a bonus for TheStreet.com readers. For more information about subscribing to RealMoney, please
Apple's weekly chart shows a powerful uptrend that began at the 2003 low. The stock rocketed higher in two sharp rally waves that carried price into the upper $80s by the start of 2006. It entered a deep correction at that time, retracing almost half of its three-year gains. The July low was the inception point for the current uptrend. The three distinct rally waves follow the rules of an Elliott five-wave pattern that is nearing completion. The current parabolic run is common behavior for the fifth and final wave of this classic pattern. But there's good and bad news here; the latest rally shows the possibility of a final upside thrust before the broad uptrend finally peters out. For Elliott aficionados, it looks like the current rally leg is ending the third of a fifth wave that will yield a deep correction back to round number $100, where a final thrust above the current highs might begin later this year. For the time being, however, Apple shareholders need to decide where and when to lock in profits. The $124 level shows up repeatedly in Fibonacci extensions and measured move targets on this pattern. The recent high hit $122.17. This number could fulfill the top, or there may be another thrust that finishes up the pattern. With the iPhone release just a few weeks away, everything is moving right on schedule for traders to sell that event aggressively.
We need to go back many years in order to place current Microsoft price action in proper context. The stock fell sharply in 2000 when the bubble burst, but bottomed out two years ahead of the broad market. It then entered a massive sideways pattern, with support below $20 and resistance in the low $30s.