Shares of Apple Inc. (NASDAQ:AAPL) have rallied nicely off last week’s lows along with the broader stock market. To regular readers of this column, this should not be a great surprise given the recent spike in market correlation. While the rally in AAPL stock in recent days has been promising, there is a near-term hurdle it needs to overcome.
When I last mused about Apple in this here column on Feb. 2, I offered that the stock must hold the $165 area or risk quickly falling toward $160 or lower for better buying opportunities to arise. To wit, AAPL stock fell swiftly after earnings and then late last week managed to string together an important bullish reversal at lower levels.
AAPL Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that last week the stock left behind a long tail on its weekly candle, which occurred right at the yellow 50-week simple moving average and the lower end of the green-dotted channel. So far this week, the stock is following through nicely. Trend-following investors now have a well-defined price area around last week’s lows of $150 as a stop loss.
As a side note, this type of multi-time-frame analysis is in my opinion absolutely key for profitable trading and investing. Without this, one cannot gain the necessary perspective needed to succeed in the markets.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that AAPL stock last week undercut its red 200-day simple moving average, stopping out traders that placed stops around there. By this past Monday, the stock had rallied right back above this moving average
If one would have had the necessary perspective to see that last week the 50-week simple moving average from the above chart held as support, even if one was stopped out it would have been easier to get back long for a trade.
As of this morning the stock is rallying in premarket trading and looks to be opening around the resistance area of $170ish, which is made up of the yellow 50-day moving average as well as previous horizontal resistance. At this juncture the reward-to-risk for buying AAPL stock for a long-side trade is better if and when the stock can clear and hold back above $170ish on at least a daily closing basis.
One the stock can hold itself above $170 then a next upside target toward $180-$185 can be traded toward.
Check out Anthony Mirhaydari’s Daily Market Outlook for Feb. 15.
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