Apple Inc.: AAPL Stock Chart Suggests New Highs in 2017

AAPL StockAAPL Stock: 2017 Top Pick

In my last report on Apple Inc. (NASDAQ:AAPL) stock, I mentioned that even though Apple stock was making strides and many bullish tailwinds were aligned, there was one blemish on this price chart causing me concern. As a result, I could not declare to be—without a doubt—bullish on AAPL stock.

The blemish was caused by the Apple stock price trading below a key moving average. It is not uncommon for a price to trade below this moving average but, until recently, Apple stock had been trading above it. On the last two attempts to regain this level, the AAPL stock price had been unable to surpass it.

I always pay attention to signals no matter how small. When signals begin to mount, I use them to formulate my trading bias. This is the method I use to generate my trading views and my trading strategies.

Apple stock is now setting up a move that could potentially take it to new heights. A completion of this setup will have the bulls cheering with joy.

The following AAPL stock chart illustrates the resolution of the blemish, and also shows the bullish setup that has developed.

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Chart courtesy of StockCharts.com

In my last report  on Apple stock, I outlined that there was a slight blemish on the Apple stock chart that needed to be rectified before the bull market could resume. This blemish was caused by Apple stock trading below the 50-day moving average. Other signals I follow were still bullish, and this was the only factor that put a slight damper on the overall bullish picture.

I am now pleased to say that AAPL stock is trading above the 50-day moving average, and the blemish has been removed.

Apple stock is now trading above both the 50-day and 200-day moving averages. These two moving averages act as dividing lines between stocks trading in a bullish healthy trend versus stocks trading in an unhealthy bearish trend. When a price is above these moving averages, it is bullish; when a price is below these moving averages, it is bearish.

Trading above both moving averages also means that the golden cross generated in August is no longer in danger of being averted. A golden cross is a bullish signal that is produced when a 50-day moving average, highlighted in blue, crosses above a 200-day moving average, highlighted in red. This signal confirms that a bull market has begun and, as long as it remains intact, higher prices can be expected.

With Apple now bullish on all fronts, a break above the resistance level—highlighted in the chart above—will set the wheels in motion towards higher prices, as it will be putting the larger bullish pattern back into play.  This pattern has the potential to send AAPL stock to a new all-time high.

The following Apple stock chart illustrates the larger bullish pattern.

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Chart courtesy of StockCharts.com

This larger bullish pattern that is illustrated on the AAPL stock chart above is now four years in the making.

What makes this pattern bullish is the structure that it has taken. Bullish patterns consist of impulse waves that take a price to new heights, and a consolidation wave that unwinds any overbought conditions that were created when the price surged to the new heights. Consolidation waves also serve as the pattern that sets up the next prevailing impulse wave.

When I look for potential investments, I specifically look for consolidation patterns.

The theory behind these waves is that impulse waves that are separated by a consolidation wave have tendencies to mirror each other in terms of length. If I apply this theory to the current pattern and use the length in dollars of the prevailing impulse wave, I generate a price target of around $165.00.

In order for this outcome to develop, AAPL stock will first need to close above resistance highlighted on the first chart above.

Bottom Line on Apple Stock

Bullish tailwinds are once again swirling around Apple stock, and my previous concerns have been effectively alleviated. The bigger bullish trend is set to resume, and AAPL stock is setting up to fly in 2017.