Apollo Group’s shares are down 45% since January’s high ($58) as a result of negative news like the Neutral rating reaffirmed at Zacks in April and Goldman Sachs’ downgrade of NASDAQ’s education stock yesterday. APOL stock’s decline met considerable resistance at $31 and has exited the oversold territory in accordance with the Relative Strength Indicator (36.4 today). The double bottom that was completed with last day’s trading session adds one more point in covering the shorts and perhaps risk with a short-term long position. I expect a pullback up to $42, since it is an important price level for the education stock. ATR indicator has also decreased a lot closer to zero and along with MACD divergence those are two technical indicators that show a probable end of the 6-month downtrend.
Apollo Group’s stock is trading for $32 per share at the moment, well below the 200-day moving average shown in the APOL daily stock chart. The downtrend which started in January 2012 includes two gap-downs, one during February and one in March that I would make use of for setting a profit target in case I went long APOL. The downtrend’s support level at $42 is a crucial level, having acted both as a support and resistance level at least 5 times in the last 12 months, pointed out at the weekly chart.
Obviously a stop loss in [intlink id=”13″ type=”category”]stock trading[/intlink] is necessary as always and [intlink id=”165″ type=”category”]technical analysis[/intlink] is here to help. The recent resistance at $31 is a great price level to set a relatively tight stop loss (about $1.5 per share), considering I’m targeting a profit of $10! Due to downtrend’s strength though, I’m willing to trade out as soon as a double top or a lower high is printed in the daily chart, despite my initial profit target. I suggest you do as well if you invest in the education stock of Apollo Group and wait for another trend reversal confirmation signal apart from the most recent double bottom!