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Today the markets and Apple broke out in the face of overbought conditions. And that’s what makes it most impressive. Normally overbought levels like these need to wind down some before a breakout can occur, but today the futures were up, riding the wave of overseas market advances, then we gapped up at the open and never really looked back.
All three indexes participated in the breakout, the Nasdaq, S&P, and the Dow, jumped out of the gate to a healthy 1% to 1.5% gap up, then steadily added to the tally as the day wore on. Apple was definitely more choppy than the indexes, and gave up some ground in the final minutes, but it still managed a 1.56% gain (close: 214.01 +3.28).
Below are the 5 minute charts of Apple (AAPL), Nasdaq (COMPQ), Dow Industrials (INDU), and S&P 500 (SPX) [click to enlarge]
The S&P and Dow printed a very bullish candlestick pattern by completely engulfing the down or red candle of previous session. AAPL posted a doji, under very low volume. In fact, all the indexes had surprisingly low volume on this breakout, which may leave some to wonder if the breakout was confirmed. Typically you want breakouts on volume that’s at least 20% over average volume. Volume was easily off by 20 to 30%. The positive was that the advance was broad based as evidenced by the advancers leading decliners by nearly 4 to 1 across the board.
We’re extremely overbought now and sentiment is pretty bullish, so there’s always a chance that the market can correct. But this market is showing no signs of giving up just yet. It is still on its uptrend and therefore all dips should be bought, and longs should let run. I see no objective short at this time. When the market decides to correct I expect it will be forceful, so advances should be guarded.
Tagged as: APPL, Breakout, Dow, Nasdaq, S&P
