What Technical Analyst Might Say About Apple After Its BreakoutThe title of world's largest company by market cap has gone back and forth of late between Apple NASDAQ:AAPL , Microsoft NASDAQ:MSFT and Nvidia NASDAQ:NVDA , with no clear leader emerging.
With about a month left to go before the tech firm reports its fiscal third-quarter results, just how is this stock positioned, and are traders ready for what comes next?
Let's dig into AAPL’s charts to see:
A Long Sell-Off Appears to Have Ended
Apple sold off fairly harshly all the way into April after hitting a December top that nearly matched its July 2023 peak:
But the stock’s Relative Strength appears to be in a good spot:
However, Apple’s daily Moving Average Convergence/Divergence (MACD) looks a bit twisted:
Add it all up and AAPL appears to have gone into the start of a basing period of consolidation.
This occurred after the stock broke out from a cup-with-handle pattern with a $197 pivot (the purple pattern at right in the first chart above).
The breakout did stop about $15 short of where it could have based on some models. That leaves me wondering if this is a minor pause, or a more serious period of sideways consolidation that the stock has entered into.
A ‘Golden’ Crossover
Note that AAPL experienced a positive algorithmic reaction to a "golden" crossover (green circle below) of the 200-day Simple Moving Average (SMA), as denoted by the red line below, by the 50-day SMA (the blue line below). This move is historically considered bullish:
However, within the daily MACD, the 12-day SMA has crossed below the 26-day EMA (the red circle above), with the histogram of the nine-day EMA in negative territory (the blue circle). That historically tends to be a bearish signal.
Checking Out the Price Action
Let's take a closer look at the most recent price action, shall we?
While the charts would historically point to a good chance that the consolidation seen here continues sideways to form a base, there is just as good a chance historically that what we might be seeing is a much shorter-term "bull flag." That’s a pattern of continuance signaling potential further upside.
How might readers know which ends up being correct?
If AAPL hits resistance again close to $220, then the charts will historically tell us that it's likely a base. But if Apple treats the $220 like a springboard within a few days, then the charts historically tell us that this is probably a bull flag.
Bullish traders (those interested in only short-term price movements) will want to see that flag, while bullish investors (those interested in Apple’s long-term business prospects) will likely be fine with a base.
Conversely, bearish traders and investors will probably just want to see that 21-day EMA face a test from the upside.
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