Medium term
Trade view / 28 July 2016 at 15:36 GMT

Apple at a critical technical juncture

Trader /
United States
Instrument: AAPL:xnas
Price target:
Market price:

Shares of Apple Inc. rallied about 6.50% on Wednesday, following the company's latest quarterly results. As a result, AAPL stock has now arrived at a crucial technical juncture, where a break above would be as bullish as a reversal from here would be bearish. 
For its latest quarter, Apple beat analyst's top and bottomline estimates, but iPhone sales decreased for the third time in a row. The bulls insist that the product refresh in September, i.e. the new iPhone 7, should help revive slumping iPhone sales. The bears, on the other hand, speak of more competition and Apple's unwillingness to make larger acquisitions. 

I look at AAPL and see a stock that is continuing to struggle through a twelve-month lens, but trying to make something happen in the near-term. 

On the multi-year chart, we see that, despite the persistent series of lower highs since the 2015 top, AAPL stock is continuing to hold on to its 2009 mother support line, which also lines up nicely with its red 200-week simple moving average. If and when this confluence area around the $90 mark were to break, a sell-off could begin to accelerate.

AAPL multi-year
Apple Inc.
Source: eSignal

On the daily chart, however, we also see that Wednesday's post-earnings pop saw AAPL stock bump right back into an equally well-defined line of technical resistance made up of its red 200-day simple moving average and the diagonal resistance line. 

For the time being, I am focusing on a potential break above resistance for a trade. Very simply, if AAPL stock can muster a break and hold above the $104.50 area, at least on a daily closing basis, I could see the stock melt higher toward $110.

Apple Inc.
 Source: eSignal

Management and risk description

The risk to this trade is, very simply, that AAPL gives us a classic breakout fake-out move and reverses gears lower as soon as it peeks its head past technical resistance. As such, any notable bearish reversal on the back of a valid breakout move should be respected.


Entry: Buy AAPL stock or CFD upon a daily close above $104.50.

Stop: $102.30.

Target: $110.

Time horizon: 2-4 weeks.

— Edited by D. Deacon

Non-independent investment research disclaimer applies. Read more


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