Analysis: Apple’s Rally – U.S. Market’s Last Hope?

Apple

As Financials are breaking below their intermediate-term support (green trendline here), and S&P 500 is just above its respective intermediate-term support (violet trendline here), Apple’s rally, fueled by its latest earnings release, may very well be the stock market’s last hope. Below, we look at Apple’s technical backdrop to see if today’s rally has legs.

Technical Overview

  • Since gapping higher in August 2017 (3Q17 earnings – blue ellipse in Figure 1), Apple’s stock has found support at this level on two occasions (giving 1 bullish K-Divergence signal and nearly giving a second during the February correction – bright blue arrows).
  • The September 2017 high (at $165) has also proven to be a key level, serving as both support and resistance over the last year (orange trendline and arrows).
  • Higher up, the stock halted at the $180 mark multiple times since the beginning of the year (excluding a one day spike above in mid-March; resistance – yellow trendline; retests – yellow arrows).
  • On April 20, the stock completed a large H&S pattern (tops – white ellipses, neckline – upward slopping white trendline, break below neckline – white arrow).
  • Today (May 2), AAPL jumped 4.4% on a strong 2Q18 earnings report, resulting in two significant technical developments. A bullish one – the stock moved back above the neckline, and a bearish one – the stock closed below its short-term resistance (red trendline and last red arrow).

Figure 1. AAPL Daily Chart

 Implications

  • The H&S pattern has a $146 downside target. Today’s move back above the neckline does not necessarily negate the target. If the short-term resistance holds, the stock will likely move back below the neckline to close today’s up-gap.
  • To the upside, if the stock closes above the short-term resistance, it may experience further bullish momentum. Next major resistance – the $180 (yellow line) to $183.50 (March high) range.

 Outlook

  • Neutral while the stock is between the short-term resistance and the neckline (red and white trendlines, respectively).
  • Short-term bearish if the stock closes below the neckline. Longer-term bearish implications if the stock closes below $165.
  • Short-term bullish if the stock closes above the short-term resistance and continues to hold above the neckline. A close above $183.50 will be constructive for the longer-term.

Conclusion

Apple’s next move may be of extreme importance to the broader markets (even more than usual). U.S. indices are on the brink of giving major sell signals and today, even Apple’s stellar earnings could not temporarily lift them. On one hand, if the stock propels higher and breaks its prior high, it is likely to see NASDAQ finding its footing, at least in the short-term. On the other hand, if AAPL’s rally falters, we may see U.S. indices finally giving in and breaking below their key supports.

Featured image courtesy of Shutterstock.

Author:
http://www.linkedin.com/in/konstantindimov