After May 8, when I wrote that Apple (AAPL) was near-term overbought, the stock pulled back close to 10% over the ensuing six trading days. By May 16, though, much of the stock’s overbought reading subsided, and now AAPL is back in a more neutral stance where bulls should have the edge again.
The longer-term chart of Apple is unchanged — which is to say that the stock found an important bottom in mid-April, from which (of course) it proceeded to bounce. The April bottom was furthermore significant in that it formed two trading days before the company’s Q1 earnings announcement. Just as doubters of the stock kicked into high gear, the post-earnings reaction likely surprised a bear or two, leading them to cover shorts.
From a technical point of view, the April lows also coincided with an important consolidation area that dates back to the second half of 2011, as once again noted in the chart below. This is to say that if and when the April lows should get broken, the stock would have further downside to at least the $355 area.
Closer up on the charts, AAPL is back in more neutral territory; i.e., the overbought readings from early May have been worked off. While the 50-day simple moving average (yellow) of Apple has become rather useless, its 100-day SMA (blue) acted as resistance at the early May highs. For fans of head-and-shoulders patterns, AAPL currently also offers something — namely, an inverted head-and-shoulders pattern (blue bubbles on the chart), with a neckline (blue diagonal line), currently near the $460 mark.
As long as Apple can hold above $430, it favors an eventual push higher past the 100-day moving average (the blue diagonal) and early May highs near $465. This could then lead to a move up to near the $500-$510 area over time.