What Technical Analyst Might Say About Apple After Its Breakout

11 июл.

The title of world's largest company by market cap has gone back and forth of late between Apple AAPL, Microsoft MSFT and Nvidia NVDA, with no clear leader emerging.

With about a month left to go before the tech firm reports its fiscal third-quarter results, just how is this stock positioned, and are traders ready for what comes next?

Let's dig into AAPL’s charts to see:

A Long Sell-Off Appears to Have Ended

Apple sold off fairly harshly all the way into April after hitting a December top that nearly matched its July 2023 peak:



But the stock’s Relative Strength appears to be in a good spot:



However, Apple’s daily Moving Average Convergence/Divergence (MACD) looks a bit twisted:



Add it all up and AAPL appears to have gone into the start of a basing period of consolidation.

This occurred after the stock broke out from a cup-with-handle pattern with a $197 pivot (the purple pattern at right in the first chart above).

The breakout did stop about $15 short of where it could have based on some models. That leaves me wondering if this is a minor pause, or a more serious period of sideways consolidation that the stock has entered into.

A ‘Golden’ Crossover

Note that AAPL experienced a positive algorithmic reaction to a "golden" crossover (green circle below) of the 200-day Simple Moving Average (SMA), as denoted by the red line below, by the 50-day SMA (the blue line below). This move is historically considered bullish:



However, within the daily MACD, the 12-day SMA has crossed below the 26-day EMA (the red circle above), with the histogram of the nine-day EMA in negative territory (the blue circle). That historically tends to be a bearish signal.

Checking Out the Price Action

Let's take a closer look at the most recent price action, shall we?

While the charts would historically point to a good chance that the consolidation seen here continues sideways to form a base, there is just as good a chance historically that what we might be seeing is a much shorter-term "bull flag." That’s a pattern of continuance signaling potential further upside.

How might readers know which ends up being correct?

If AAPL hits resistance again close to $220, then the charts will historically tell us that it's likely a base. But if Apple treats the $220 like a springboard within a few days, then the charts historically tell us that this is probably a bull flag.

Bullish traders (those interested in only short-term price movements) will want to see that flag, while bullish investors (those interested in Apple’s long-term business prospects) will likely be fine with a base.

Conversely, bearish traders and investors will probably just want to see that 21-day EMA face a test from the upside.

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