iPhone 5 frenzy has caused Apple(AAPL) stock to break out and hit new highs. If the nominal breakout seen so far is successful, what is the next level for Apple stock? One good way to make an estimate is to apply the Adam Theory of Markets.
The Adam Theory of Markets was described by renowned technician Welles Wilder in his 1987 book. Wilder is known for developing Relative Strength Index (RSI), Average Directional Index (ADX), Average True Range (ATR), and Parabolic SAR. Wilder’s famous work is New Concepts In Technical Trading Systems. His 1987 work on Adam Theory is not well known, but applies to the present situation of Apple stock.
Wilder gave credit for Adam Theory to Jim Sloman. Wilder claimed to have paid Sloman $1 million on December 7, 1985 to learn the Adam Theory, which focuses on markets’ inner symmetry. The crux of the Adam Theory is that in a trending market with great velocity exact mirror images are produced on price charts.
My experience has been that the Adam Theory works well when a stock is over owned, over hyped, and is in a momentum phase. Apple stock at present fits the description. The move from the post earnings low is about $77. According to the Adam Theory, the mirror image of the recent leg will lead to another $77 to a target of $721.
As my long time readers know, my method is far more complex and takes into account a multitude of factors to generate high risk adjusted returns, i.e., returns in excess of those commensurate with the risk taken….Read more at Forbes
