Apple Inc.: AAPL Stock is Still Bullish in a Sea of Red

AAPL StockAAPL Stock: Standing Tall

The markets are under duress as selling pressure and volatility are the order of the day. September is historically the worst-performing month of the year, so it is not a coincidence that pressure is mounting now. It is difficult to gauge the amount of selling that might grip the markets, but it’s safe to say that even fundamentally strong companies like Apple Inc. (NASDAQ:AAPL) stock are not immune.

History has proven that market selloffs create opportunities to pick up our favorite names at a discount. I can see why Apple stock makes that list of favorites, as it is currently trading at an attractive price-earnings (P/E) ratio of 12.63, and that compares favorably to the industry average of 20. Throw in a dividend yield of 2.21% and this investment vehicle pays the acquirer to hold onto shares. AAPL stock is an investment that keeps on giving.

The fundamentals are great for finding solid investments, but the information is not timely.  That is where the charts come into play. In this volatile market, I always like to know what picture the charts are painting.

The following chart illustrates the current setup in AAPL stock.

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Chart courtesy of StockCharts.com

In early August, Apple stock broke out from a descending triangle. Descending triangles are consolidation patterns that form when a stock reaches a temporary level of equilibrium.

AAPL stock completed these five points of contact and broke out to the upside after the company’s earnings announcement. This confirmed a bullish bias. These patterns are great because, not only do they tell me which direction the stock will go, but they also produce potential price targets. The initial target based on this pattern is the old high near $130.00, where the descending triangle pattern began.

Trading action has reaffirmed this pattern and Apple stock has just successfully backtested the descending triangle. It is very common for trading instruments to retest a previous area of resistance. Apple stock tested the triangle on September 9, 2016 and was quickly turned away. This can only be viewed as bullish price action.

The backtest is not the only piece of bullish news that reaffirms my premise, as the following chart of AAPL stock illustrates.

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Chart courtesy of StockCharts.com

Just as August 2016 was coming to a close, AAPL stock generated a golden cross. A golden cross is a bullish signal that is produced when a faster 50-day moving average (highlighted in blue) crosses above a slower 200-day moving average (highlighted in red). Traders use this signal to confirm that a bull market is on the horizon. It is always wise to trade in the direction of this momentum indicator.

The timing of this indicator couldn’t have been better, as it acts to further reaffirm the bullish premise. It is my opinion that Apple stock is now ready to resume its bull market. The following chart illustrates the long-term bull market in AAPL stock.

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Chart courtesy of StockCharts.com

The long-term trend is bound by an ascending channel. There are two parallel lines that define this trend. The share price oscillates between these two lines for as long as the trend permits.

The descending triangle that has set up is nothing more than a consolidation pattern within a longer-term bullish pattern. As long as AAPL stock is within this range, my bias will be bullish. If the selling in the equity markets continues, and really does a number on the markets, I would be on the lookout for a drop below $90.00. A drop below the price level would negate my bullish premise.

The Bottom Line on Apple Stock

I am currently bullish on AAPL stock, as the chart pattern is setting up to move higher and the confluence of indicators are supporting this premise. My bias will remain bullish up until the charts give me reason to change that bias. The current selloff has done very little to disrupt the bullish picture in Apple stock, and this is very reassuring.