Trade of the Day: Apple Inc. Stock Embarks on Lower Highs

AAPL stock doesn't look ripe for any major breakouts anytime soon

aapl stock - Trade of the Day: Apple Inc. Stock Embarks on Lower Highs

Source: Beni Krausz via Unsplash

Shares of Apple Inc. (NASDAQ:AAPL) rallied more than 4% on Wednesday following the release of its latest batch of earnings. Through the lens of trading the near-to-intermediate-term moves in AAPL stock, it now looks to be overbought again at the upper end of its trading range. Active investors and traders could look to make bets that the stock won’t rise much further (or fall) for the time being.

I could go into all the details of Apple’s latest earnings reports, but you can find the hindsight analysis in many other places. In other words, while it is always interesting to read how many iPhones Apple sold in its latest quarter and hear out the company’s guidance among other things, in this here column I am focusing on actionable trade alerts.

Here are my top three “concerns” around AAPL stock right now:

  1. The stock appears to be ready to make another lower high, just like some other large cap tech-related stocks
  2. These lower highs are taking place (or are in development) on the back of good or even better than expected news
  3. The stock remains largely range-bound and Apple’s CFO has been on a stock selling spree of late in this range.

Apple Stock Charts

Click to Enlarge

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

Looking at the multiyear weekly chart, we clearly see that as the stock began bumping into the upper black resistance line in November 2017, it started to stall. Interestingly, the weekly MACD momentum oscillator at the bottom of the chart had been topping out many months prior and now still looks to have more room to the downside.

The choppiness in AAPL stock of the past couple of quarters also has it bouncing off well-defined technical support, namely off the yellow 50-week simple moving average. Thus, a simple observation would be that if and when the stock slices through this moving average on the downside, it ain’t gonna be bullish.

Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart, we see that choppy sideways price action of AAPL stock a little better. We also see that although the stock did bounce on May 2nd following the earnings report, the stock has (at least thus far) not managed to break out of this range to the upside.

From here, active investors and traders have several options: 1. Long-side swing trades could be closed. 2. Less risk-averse stock traders could look to enter partial short positions in the stock. 3. Options traders could try to sell “out-of-the-money call spreads” for income, making the bet that the stock won’t rise much more in the coming days/weeks.

Either way, AAPL stock in my eye looks toppy and not ready to embark on any new major breakouts to the upside for now.

Check out Anthony Mirhaydari’s Daily Market Outlook for May 3.

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