Stocks rose on Wednesday, and technology stocks as a sector performed well. Within this space, the world’s largest stock by market capitalization, Apple Inc. (NASDAQ:AAPL), also lifted and, through the lens of technical analysis, moved to a key spot where a next trade looks to be in the cards.
For some names like AAPL stock, however, this recently tight trading range may be looked at as constructive post-earnings consolidation, as a next leg higher is setting up.
As regular readers of my column know, I am a big believer of looking at any given stock through the lens of a multi-time-frame process.
Although a bigger-picture chart does not necessarily have to agree with a nearer-term time frame for a good quality trading setup, the perspective gained on the larger time frames is crucial for risk management.
AAPL Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
To wit, looking at the multiyear weekly chart of AAPL stock we see that the latest multi-quarter rally, which began in May 2016, had reached the upper end of the longer-standing up-trending range by November 2017. Since then the stock has from this angle mostly trotted sideways with the exception of a breakout rally in early May of this year.
In my eye, however, from this perspective AAPL stock is largely overbought and not at a favorable spot to initiate fresh long positions from an investing point of view.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see the aforementioned sideways movement since November 2017 in more detail. The breakout rally in early May clearly pushed AAPL stock past the upper end of the trading range as I marked with the blue bar.
Over the past couple of weeks, however, the stock has settled back into a consolidation phase that from a pattern perspective is taking the shape of a bullish pennant or bull flag, depending on how chooses to draw the lines.
This now allows traders to focus on either a breakout higher for a new bullish trade or a breakdown lower for bearish bets.
If AAPL stock manages to break and hold above $189.30 then a rally toward as high as $200 cannot be ruled out … albeit not in a straight line.
Alternatively, if AAPL breaks and holds below $185 then a revisit of the high $170’s is in the cards.
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Source: Investor Place