Apple Inc. (NASDAQ:AAPL) reported earnings after the close of trading Thursday. Although the company sold less of the popular iPhone product in its latest quarter, AAPL stock propped up in after-hours trading. The stock ‘s drop in recent days pushed it to an important technical level which must hold if bulls want to see the stock go higher in the near term.
As a reminder and as I often allude to in this column, better reward-to-risk trading opportunities tend to set up after any particular stock reports its earnings as opposed to taking a lottery ticket ahead of earnings.
Before looking at any charts, it is always important to keep the broader market’s posturing in mind, especially for a large stock such as that of Apple. Why? Because broader stock market risk appetite from an institutional money allocation perspective will inevitably also be reflected in AAPL stock given it is included in many important indices.
In that vein and so you know, in my eye the broader market is increasingly looking tired for the time being.
AAPL Stock Charts
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
Over the past week or so and into its earnings report, AAPL stock dropped about 8% from the upper end of its well-defined trading range (black parallels on the chart) down to the lower end. Note that the lower end of the trading range also coincides with the blue 100-day simple moving average, which all things considered has been a good reference point.
AAPL stock has indeed bounced off this lower support area again so far in after-hours trading late Thursday, but if and when this area around the mid $160s should fail, then the next downside target area would likely become the red 200-day simple moving average.
Moving averages legend: blue – 8 day, yellow – 21 day
On the second chart with nearer-term moving averages note that through a multi-month lens AAPL stock has since last November essentially traded in a range-bound manner. As I often tell my clients, members and coaching students, trading range-bound markets is one of the easiest ways to lose money as the propensity to die by a thousand paper cuts is rather high.
As such, note that in after hours trading on Thursday AAPL stock popped about 3% higher, which so far has merely pushed it to the upper quarter of said trading range.
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From where I sit, AAPL stock must be able to overcome the $176 area on the upside at least on a daily closing basis if it wants to have better odds of breaking out of the current multi-month sideways range. Until the range is broken on the upside the odds currently still favor the bears. In other words, particularly should an intraday post-earnings rally fail and ultimately break below the mid $160s, then downside into $160 or lower could quickly unfold.
Check out Anthony Mirhaydari’s Daily Market Outlook for Feb. 2.
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