Apple Inc. (NASDAQ:AAPL): A Surge … Then a Short?

Apple Inc. (NASDAQ:AAPL) reported much-better-than-expected results for its fiscal third quarter after Tuesday’s close. And although the top line declined for the second straight quarter, traders still were giddy, bidding Apple stock up as much as 8%.

Beat the BellIt’s still too early to read a whole lot into AAPL’s price action. But Apple does offer a well-defined technical line of resistance, which if overcome, could see even more rally. However, if AAPL fails the line, it will set up a well-defined short situation for traders to sink their teeth into.

The iPhone sales slump is nothing new. Many customers are likely waiting for a product refresh this fall, and competition continues to stiffen. The bulls argue that sales for the upcoming iPhone 7 may come in above expectations, and that Apple could do much more on the services side of things. In principle, I agree with both of those bull cases, but while I remain a longer-term bull on AAPL stock in the near-term, the technical picture has yet to improve or show enough bullish confirmation for me to jump back on the train.

Apple Stock Charts

Looking at AAPL stock through the multiyear weekly lens we see that the bull-trend remains intact broadly speaking.

Note that the overshooting rallies in 2012 and the 2014-15 period both nicely retraced back to the multiyear diagonal support (the trendline). The red 200-week simple moving average also comes in near this support line, thus making this all the more important of an area through the lens of technical analysis.

If and when this confluence support area were to break, then a flush into the mid- to low $80s in AAPL stock looks likely.

NASDAQ:AAPL weekly chart
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On the intermediate-term daily chart, we see that AAPL stock remains in a well-defined downtrend that has the purple dotted line as diagonal resistance and which also lines up with the red 200-day SMA. On Tuesday after the earnings report, Apple rallied close to the $104 area, which as we can see on the daily chart is where diagonal resistance and the 200-day SMA currently line up.

NASDAQ:AAPL daily chart
Click to Enlarge

In my mind, how AAPL stock reacts to this area around the $104 is crucial for the next nearer-term move. A convinced push and hold above $104 could get the stock rallying toward $110, while any stalling out followed by a bearish reversal near $104 would set up another nice short-side trade. In the event of the latter, look for Apple to fall back toward the low $90s as a next price target.

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