Apple Inc.: Apple Stock Remains Bullish Despite the Blemish

AAPL StockAAPL Stock: Nothing Makeup Can’t Fix

In my last report on Apple Inc. (NASDAQ:AAPL) stock I had mentioned that even though Apple disappointed on earnings, the bull market in AAPL stock remained intact. At the time my report was published, AAPL stock was trading at $114.48, and now (December 6), it is trading at $109.11. As a result, I have some explaining to do.

The price has come down a little bit and, in the process, it has added a blemish to the trend. But rest assured; at this moment, the overall trend still remains bullish.

There are a number of fundamental events that could add a few points onto the price of Apple stock. Chatter has already begun regarding the new Apple “iPhone” that is set to debut to mark the 10th anniversary of the iPhone.

Apple has done an excellent job of increasing its market share after the Samsung Electronics Co Ltd (KRX:005930) “Galaxy Note 7” debacle. I am even hearing rumors that Apple is interested in entering the autonomous-drive vehicle market.

Apple is definitely making strides and the future is bright for this consumer electronics producer. As long as the price does not fall off the proverbial cliff, the long-term trend will remain intact and the bull market in AAPL stock will continue.

The following stock chart illustrates the long-term bullish trend in Apple stock.

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Chart courtesy of StockCharts.com

AAPL stock has been trading within a well defined channel for almost a decade. There are two parallel lines that define this trend, and traders refer to this trend as an ascending channel. An ascending channel has two trend lines that define the upper and lower bounds. The share price oscillates between these two lines for as long as the trend permits.

A trend reversal would occur when the shares finally gather enough strength to break below this channel. This would constitute falling off the proverbial cliff. In order for that to happen, Apple stock would need to trade south of $95.00, and it seems unlikely at the moment.

The lower panel on the chart above suggests that a bullish run could be on the horizon. Moving average convergence/divergence (MACD) is a simple and effective trend-following momentum indicator. Signal-line crossings are used to distinguish between bullish and bearish signals.

In the past eight years, there have been two bullish MACD crosses and both of them resulted in a prolonged trending move in Apple stock. Each run ended when Apple stock hit resistance outlined by the ascending channel.

Another bullish MACD cross is on the verge of generating, and I can only assume that a similar outcome will develop. A bullish MACD cross would suggest, at minimum, that AAPL stock would trend higher and create a new all-time high.

The following Apple stock chart illustrates the blemish that I was referring to.

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Chart courtesy of StockCharts.com

The Apple stock chart above is bullish in many ways, but there is one slight blemish that can be a cause for concern. I will begin with the bullish factors before I move on to the blemish.

In late July, AAPL stock gapped above the 200-day moving average after reporting earnings that shattered expectations. The 200-day moving average is the dividing line between stocks trading in a bull market versus stocks trading in a bear market. When the share price is above the moving average, it is bullish; when the share price is below the moving average, it is bearish. Since that day, that gap has remained open and AAPL stock continues to behave bullishly by trading above the 200-day moving average.

In late August, Apple 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). This signal is used to confirm that a bull market is on the horizon and, as a result, it creates a bullish tailwind. This tailwind is why bullish patterns have a higher likelihood of succeeding when this indicator is engaged.

Apple stock is trading below the 50-day moving average, and this price action is the blemish that I have been referring to. Shortly after the disappointing earnings report in October, Apple stock fell below this moving average and has failed to trade back above it.

In order for me to be without a doubt bullish on Apple stock, it will need to close above the 50-day moving average.

Bottom Line on Apple Stock

The overall trend in Apple stock remains bullish, but there is one factor that could be a cause for concern. In order for these concerns to be alleviated, AAPL stock will need to close above the 50-day moving average.