|Wall Street is still in the midst of its Love Fest with Apple as the stock closed higher again despite fears of profit taking. Apple closed at 55 5/8, a gain of 1 1/8 or 2.06%, this despite the fact that Apple was trading in negative territory throughout most of the morning session.
Volume continued to be high, though nowhere near as high as yesterday's astronomical figures, with 5,433,800 shares trading hands.
Apple's PC competitors also fared well with IBM, Compaq, Dell, Gateway 2000, and Hewlett-Packard all closing up today.
The Dow and the Nasdaq shared in the glory as well with the Dow closing at 11193.70, up 66.81. The Nasdaq closed at 2793.07, a gain of 21.21.
For more stories on Apple's stock movement, check out our Apple Stock Watch Special Report.
The Mac Observer Spin: We had many Observers ask us more about the concept of a Support Level and why US$50 was a Glass Ceiling. We tapped Wes George, our own Apple Trader to find out more and he prepped this tutorial for us:
Resistance is formed because people bought at the last top and then the stock price dropped and languished at lower levels. When this situation happens many investors will hold because they don't want to sell at a loss. Nevertheless, they become discouraged or disgusted with their investment choice and as soon as the stock rises back up to their entry point they sell to get out without a loss. This is what creates a resistance level. It happens every time because of the human psychology involved. There are always enough newbie and undisciplined investors to guarantee the resistance/support model.
When a stock breaks through resistance it does so by the number of buyers finally exhausting the reserve of disgruntled sellers at the resistance point. This (as a general rule) creates a new base for a higher "trading channel," because a whole new group of optimistic investors, often thinking in new terms about the future of the stock, the company and/or market conditions, has bought in. This classic scenario first observed at the turn of the century by Charles Dow is exactly what has happened to Apple in the 1990's.
$50 should become support for AAPL now as the stock climbs upward to who knows what in search of a new resistance level. At these new stratospheric heights it remains unclear whether old levels set back in the early 1990's will enforce new resistance levels on the way up. According to the Dow Theory, which is from a day when investors often held stocks for decades, resistance can remain in effect for a very long time. But I haven't ever seen it tested in real life over this long a time and I suspect that some of the time frame issues in our digital economy may have been shortened since the mid-century.
What to look for now: Will Apple settle into a new trading channel? That is, will Apple define a new resistance at, say $58, and then spend a few months bouncing back and forth between $58 and $50, like it did between $41 and $49? Or will AAPL start trending upward, finding new resistance, falling back a bit, then breaking the resistance and continue up?
Based on the type of patterns that we have seen in the past with AAPL, I would bet on a several month long higher trading channel, but who knows?
After MacWorld we could enter a wait-and-see consolidation period as it will take the first earning numbers on the P1 to come in before Apple can go further. Also the continue success of the iMac wll be critical in the fall. If the Christmas season comes on strong with the iMac and P1, it could be insanely, outrageously, great for AAPL investors.