Apple Inc.: These 3 Charts Show Where AAPL Stock Could Go Next
Sidelined on AAPL stock
Who wants to profit from the next move in Apple Inc. (NASDAQ:AAPL) stock? How difficult can it really be? After all, there are only three directions a stock can trade: up, down, or sideways.
After peaking in mid-July 2015 at $130.00 per share, APPL stock sold off violently and garnered support at the $90.00-per-share level. Each and every time Apple approaches this technical level, investors step in to support the price. Each subsequent rally ends at a lower high, as investors are willing to exit positions at lower prices. The price action is suggesting distribution as long-term investors liquidate.
Chart courtesy of www.StockCharts.com
This price action generates a descending triangle on the chart (see blue lines in the above chart). As a rule of thumb, descending triangles are usually a bearish formation that appears frequently in downward-trending stocks.
A signal will generate when the price breaks above or below the two trend lines that make up the triangle. This will provide us with a directional bias.
AAPL Stock’s Medium-Term Chart
This five-year, medium-term chart sheds some more light on the current drivers of price:
Chart courtesy of www.StockCharts.com
As we can see on this chart as well, the $90.00 level is indeed a significant price level for Apple stock. This price marks AAPL stock’s high made in September 2013, when a resistance level was born. The initial sell-off saw AAPL stock lose approximately 44%. It took two years to regain that level and a break above $90.00 now marks support.
When a major resistance level is broken to the upside, that resistance level often becomes a support level. Often, prices will return to test that support level, offering interested investors a second chance to buy.
AAPL stock has returned to this level on five occasions. It is rare for a stock to offer investors that many chances and it makes me question the ability of AAPL stock to hold that price on continued tests.
On August 2015, a death cross was generated.
Now, if you’re wondering what these signals mean, let me explain…
A golden cross indicates a bull market is on the horizon, while a death cross indicates a bear market is on the horizon. The signal is confirmed when the faster moving average—usually the 50-day moving average—moves above or below the slower moving average—usually the 200-day moving average—on the chart. Golden crosses and death crosses are exact opposites.
On September 2014, a golden cross was generated, signaling a bull market ahead. Apple shares rose 109% in following six months.
On August 2015, a death cross was generated on Apple’s stock chart. This tilts the bias toward the downside. This trend is set to continue until a new golden cross is generated.
When the market is trending downward and support is so clearly defined, there is no doubt that many have set their stops at the $90.00 level. A confirmed close below $90.00 will set off a tide of selling.
Apple Stock’s Long-Term Chart
This 10-year, long-term chart for AAPL stock reinforces the importance of the $90.00 support level:
Chart courtesy of www.StockCharts.com
APPL stock has been trading within the confines of a large channel that spans approximately 10 years, a step-up pattern that consists of higher highs and higher lows. The definition of an uptrend, the above chart reinforces the importance of the $90.00 level in providing support. A break below $90.00 would negate the long-term trend in Apple stock and suggest a fundamental flaw in the company’s business.
The Bottom Line on AAPL Stock
Overall, the current picture is bearish. The descending triangle and death cross confirm this view. A major point of support, the $90.00 level has halted all of the stock’s attempts at lower prices and should be carefully watched.
My suggestion to interested investors of those looking at a stock similar to Apple stock is to wait for a catalyst, such as a decisive break of a descending triangle pattern. Until that time, the trend will be sideways.
