BR Technicals’ Technical Analysis Report – Apple Inc. (AAPL)
March 21, 2019 (Published March 26, 2019)
Prepared By Brandon Ross, CMT
Click to read the analysis with charts, and also download a PDF of the report: www.brtechnicals.com/apple-aapl-stock-report/
Long-Term Analysis
- AAPL is in a long-term channel that began in 2010.
- The channel bottom is moving at the same pace as the 200-week moving average.
- When a correction occurs, the 200-week moving average and channel bottom act as a support.
- There have been three corrections within this channel.
- -45%; -31%; -39%
- The latest drop, in 2018, was the quickest and most volatile. The MACD indicator fell sharply, and is rising just as quickly.
- 50-week moving average did not have time to correct.
- However, it was perfect technical setup.
- The stock peaked at the top of the channel, and stopped its decline at the bottom.
- Does not qualify as an Elliot Wave.
- In this case, the third wave is the shortest wave, and thus nullifies it as an impulse wave.
Medium-Term Analysis
- A triple top reversal pattern stopped the stock in 2015.
- After a year, and a -31% drop, the stock gapped above the minor downtrend line to begin a 3 year uptrend.
- A few weeks later the 50-day moving average crossed back above the 200-day moving average.
- The stock peaked at $230 dollars, and fell through the minor uptrend channel in Q4 2018.
- A few weeks later the 50-day moving average fell below the 200-day moving average.
Short-Term Analysis
- The drop in 2018 began as a small head and shoulders reversal pattern.
- The drop in 2015 began with a triple top reversal pattern.
- The stock has since recovered from its -39% slide by gapping both the 50-day moving average and the 200-day moving average.
Report
Apple has gained more than 1,850% since 2009, but not without its rough patches. The stock has fallen more than 30% three times: -45% in 2012-2013; -31% between 2015-2016; and most recently -39% in 2018. Although the stock has lost a third of its value three times over the last 10 years, it has remained within a channel throughout the current bull market. Each of the drops began when the stock reached the upper channel resistance line, and ended on the channel support line. The stock has behaved like an example in a technical analysis book.
In fact, the three times the stock peaked, there were also clear technical that the stock would sell-off. The first drop began when the stock was making new highs, but the indicators signaled a clear bearish divergence. The second drop began after a triple top reversal formed along the top of the channel. Third, the latest drop began along the channel resistance, and a small head and shoulders reversal pattern formed.
The stock is still within its long-term channel, and this provides a few trading signals. First, if the stock ever falls below its long-term channel support, which is also the 200-weekly moving average, a sell signal is generated. If the stock were to break the support, it could signal an economic recession, and a cyclical bear market. AAPL is a very popular stock, and has a high positive correlation to the S&P 500 (250 day correlation of 0.81). So if the stock is falling out of the channel, then the rest of the market is probably falling into a downturn as well.
Until the stock violates the channel, a buy signal is generated when the stock reaches the support. Supports should stop the stock from falling, and buying near a support has a great risk-to-reward ratio. A stop is placed just under the support line, in case the uptrend ends. We opened a position in our Technical Portfolios after the stock gapped away from the support line, indicating a successful test.
Because the stock is a great example of technical analysis, there are simple moving average trades that can generate some good returns. A very common trade, the Golden Cross, generates a buy signal when the 50-day moving average crosses above the 200-day moving average. A sell signal is generated when the 50-day moving average crosses below the 200-day moving average.
Finally, another great way to trade AAPL is to open a position when the price crosses above the 50-week moving average, and sell the position when it crosses below. Doing this, you would have bought around $16, then sold near $70 (these are split adjusted prices). A second purchase occurred around $65 with a sell around $105, and a third purchase at $102 with a sell near $180.
The stock has been a key part of many investor’s portfolios, but with good reason. The huge increase in the stock price since 2009 has drawn a lot of attention to the company and its stock. When investors are really fearful of the company, the economy, or both, then the stock will fall out of its channel. Until then, the stock should continue higher over the time.
Click here to see the charts and download a PDF copy of the report: www.brtechnicals.com/apple-aapl-stock-report/