It has been a while since I last shared my thoughts on the charts of Apple (AAPL). So, as Apple earnings are expected to come out Wednesday evening — and because Apple stock is trading at an interesting juncture — now’s an ideal time to revisit the stock.
A quick look at the numbers: Analysts are expecting Apple earnings of $10.17 per share on revenues of $43.55 billion — not much wiggle on a year-over-year basis. That said, analyst estimates have risen slightly over the past couple of months, which is to say that the bar has been somewhat elevated for AAPL going into Wednesday’s announcement.
The Apple news and rumor mill continues to slow. Anymore, the amount of staunch opinions and chatter around the company has virtually collapsed, at least compared to 12 months ago. For the most part, this is directly reflected in the price action of Apple stock, which has dramatically slowed — particularly in the past few months.
Yet when I do my weekly rounds with fellow traders and hedge funders, it is surprising how much focus the “smart money” still has on AAPL stock.
So, let me share a few thoughts about Apple stock charts that the community is seeing of late:
Apple Stock Charts
When looking at any multiyear chart — be it economic data or stocks — I find that for perspective, more often than not, it’s best to simplify the analysis. So when we pull up the multiyear chart of Apple stock looking back to 2009, one line of reference that sticks out is the 200-day simple moving average (red). Note that the line held as good support from 2009 into 2012, but when AAPL went vertical and distanced itself too much from the moving average, it ultimately led to a severe break below the moving average in November 2012.
In August 2013, Apple stock again managed to push back above the 200-day MA, and the moving average has held as support ever since.
Through that lens, should AAPL drop below its 200-day moving average — which is less than 3% below last Thursday’s closing price — bulls should get concerned about the stock’s near- to medium-term outlook.
On the daily chart, we can see that Apple stock has been forming a tightening trading range since last autumn, with support at the aforementioned 200-day MA near $510, and clearly defined resistance at $550.
For my part, once Apple stock begins trading again on Thursday after Wednesday afternoon’s earnings report, I would be interested in buying AAPL on a break above $550 for a move toward $580-$600 in coming months. If the stock decidedly breaks the $510 support level, I also might be interested in selling out-of-the-money call spreads or even shorting the stock.
But maybe more importantly, as long as AAPL stock remains stuck in the $510-$550 trading range, for my part, Apple stock is mostly dead money.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.