AAPL: Cup with Handle Base to study for Future trades

This is used in conjunction with the Stocks Over Coffee Podcast on Technical Education Cup with Handles.

Apple is the largest company in the world with a market cap of 2 trillion. This is no easy feat to accomplish but is there a way to get into a small company before it becomes a household name? There is! One just has to notice the cup and handle base and a few other things. First thing you want to make sure is the fundamentals are working. This means you want the company to be growing sales and earnings. This mean the company has a minimum of 25% sales and earnings for the last two quarters. Apple meets the earnings easily but sales can be forgiven since they are generating 100%+ increases quarter over quarter as shown below:

Quarterly Sales
Jun03: +8%
Sep03: +19%
Dec03: +36%

EPS Quarterly
Jun03: +300%
Sep03: +433%
Dec03: +350%

Once the fundamentals are researched you want to make sure that there is a technical setup that is done by institutions. First you can look into the daily $ volume. if the daily $ volume has at least 40mm in activity per day then you can go to the next step or looking for the technical setup. In this tutorial we are looking for a cup with handle setup and Apple will be used for the tutorial. In the Cup with Handle base these are the criteria below:

1. Minimum 30% Prior up trend
2. Cup Base from 7 weeks to 65 weeks
3. Cup Depth below 30%
4. Handle Base with minimum 2 weeks
5. Handle Depth below 15%

Once the check list is done then you can set your buy point. Once the buy triggers then you can confirm at the end of the day if the price is above the pivot point and if the volume is 50% above average. If both of these are great then at the end of the week on Friday you can check the weekly volume is also 50% above average volume then you are good to hold for two major sell rules. The two sell rules I use are

1. 25% Profit Target (CAGR of 115%)
2. Break Below 10 Week Moving Average (CAGR of 156%) 185% Profit

Both of them did great on an annual basis and on a price adjusted yearly basis for this Apple play. How do you decide on the sell rules? It depends on your individual rules and psychology.

Thank you for reading the write up.