Apple Stock Unlikely to Break Multi-Year Resistance – TheTradersWire

Apple Stock Unlikely to Break Multi-Year Resistance


Apple Stock Unlikely to Break Multi-Year Resistance

By Alan Farley | August 1, 2017 — 10:34 AM EDT

Tech icon and Dow component Apple Inc. (AAPL) reports fiscal third quarter earnings after Tuesday’s closing bell, with the confessional gathering the customary undivided attention of Wall Street and the trading public. However, the news is unlikely to please long-term bulls or bears because the focus has already shifted into this fall’s iPhone 8 release, offering a timely excuse if Apple fails to meet expectations while reducing upside potential if it issues a solid report.

The stock reached four-year channel resistance in May and dropped into a trading range that could mark a long-term top. Price action since that time has been inconclusive, but the failure to post new highs since May 15 waves a red flag that supports the topping thesis while telling long-term shareholders to take defensive measures to protect profits ahead a potential decline that could reach $110. It is possible that the fall iPhone rollout will generate bearish catalysts for that decline. (See also: Apple in ‘Panic’ Mode Due to iPhone 8 Software Bugs: Report.)

AAPL Long-Term Chart (1987 – 2017)

The stock topped out at a split-adjusted $2.13 after the 1987 crash and entered a long period of underperformance, drifting sideways for more than a decade ahead of an ill-timed 1999 breakout that stalled at $5.37 in March 2000. The dotcom bubble then burst, dumping the price back within multi-year range resistance in the second half of the year and into a sideways drift that persisted into a 2004 breakout.

Apple stock reached 2000 resistance a few months later and took off in a powerful trend advance that surprised many market watchers of that era, lifting in multiple waves into the 2007 top at $29.00. A double top into 2008 yielded a breakdown that coincided with the economic collapse, but the stock held up relatively well compared with its peers, holding support in the low teens. That decline marked the first of three support tests in nine years at the 50-month exponential moving average (EMA). (For more, see: If You Had Purchased $100 of Apple in 2002.)

The subsequent uptrend exceeded the 2007 high in 2010, allowing the market leader to continue the string of higher highs and higher lows in place since 2003. A correction starting in 2012 reached 50-month EMA support for the second time in 2013 while completing the outline of a broad ascending channel that is still in force more than four years later. The 2015 high and 2016 low also reversed at channel boundaries, reinforcing a long-term pattern that now predicts another steep downturn.

AAPL Short-Term Chart (2015 – 2017)

The uptrend topped out near $130 in the first half of 2015, giving way to a correction that tested the will and pocketbooks of long-term shareholders, grinding lower in a volatile pattern that tested support at $90 four times in nine months. A bounce into the second half of 2016 caught fire following the presidential election, lifting the stock above 2015 resistance and into a series of new highs that peaked at $156.65 in mid-May. It then reversed at channel resistance, carving a trading range that still shows no signs of yielding a new trend wave – higher or lower. (See also: Apple Stock Could Fall to $110 in Coming Months.)

On-balance volume (OBV) topped out in May 2017 at the same time as price and entered a minor distribution phase that shook out weak hands into early July. The bounce into August has attracted healthy buying interest, but the price and the indicator have failed to reach their second quarter peaks, signaling a holding pattern that may not break higher or lower following this week’s quarterly report. (For more, see: Thinking About Apple’s Upcoming Results.)

The Bottom Line

Apple CEO Tim Cook could announce the date of the iPhone 8 release during this week’s earnings report, shifting attention away from second quarter results. Bulls and bears may need to lower their expectations, given this deflection, because the news might not attract the buying or selling power needed to lift the stock above multi-year channel resistance at $160 or drop it though two-month range support at $140. (For additional reading, check out: Why You Can’t Be Emotional About Apple Stock.)

Published at Tue, 01 Aug 2017 14:34:00 +0000

About the author


Online resource for daily updates and information relating to investing stocks, bonds, forex, real estate and much more.