Apple (NASDAQ:AAPL) — This stock has had a spectacular run this year, up over 65%. Much of the stock’s move is based on new product development, and the company excels in that area. On Sept. 11, when new products were announced including the iPhone 5, the stock popped from $662 to over $705, only to reverse down, falling to its 50-day moving average at $652 on Tuesday. But since it closed higher than the prior day, it may have reversed the near-term downtrend. So, is it a buy?
There are many fundamental questions regarding pricing power, profit margins, advancing competition, and whether carriers continue provide the subsidies to Apple, etc. But since this is a technical review, those questions must be deferred to the fundamental analysts.
From a technical perspective, the stock appears to have formed a support line at $655-$656, just above its 50-day moving average at $652, which is rising. The MACD is oversold, and as noted above, a reversal may have occurred on Tuesday. At best, the current trend is sideways, tracking the support line at $655 to $656.
Here are the possibilities for AAPL’s future direction:
1. The support holds, and the support line and 50-day moving averages are buy points with the stock eventually working its way higher.
2. The stock holds as noted and trades sideways, between $655 and $680, for up to several months before either falling through the support line, turning the line into a neckline of a head-and-shoulders top, or resuming its upward trend.
3. The stock resumes its near-term downtrend, closes under $652, and thus confirms an immediate head-and-shoulders breakdown with a target of about $605.
October is traditionally Apple’s best month. Perhaps its future direction will be provided on its next quarterly earnings report on Oct. 25. On the other hand, the chart may break and tell us its next direction.