John Reese recently penned a story on The Street about 5 guru-tested stocks (Apple (AAPL) , Sony (SNE) , Starbucks (SBUX) , VF (VFC) and Williams-Sonoma (WSM) ). While these five stocks may have been selected with a nod to the techniques used by investors such as Warren Buffett, Peter Lynch and others, those long-term fundamentally driven investors probably would not defer their buying if the chart looked weak. I, on the other hand, I have no problem taking a good investment idea and trying to buy it better. Let me show you want I mean.
In this daily chart of AAPL, above, we can see that AAPL has declined recently to test the 50-day simple moving average line. The longer-term 200-day average line is now moving up and is comfortably below the market. The on-balance volume, or OBV, line has declined a little with the price action and is not signaling major distribution or selling. As prices made higher highs in August, September and October, the 12-day momentum study at the bottom of the chart made lower highs. This lower high in momentum is a bearish divergence and tells us that the rate of the price advance slowed into the recent peak. AAPL stalled around $110 on the way up, so the $110 area could act as support on this pullback. If support does not develop around $110, then a deeper decline into the $100 to $105 area is possible. Looking ahead to 2017, I like AAPL and think it can make a year-end rally that extends into the spring. It is just a matter of where to buy it.