Apple, the stock market’s most important name, has underperformed recently. That may change. Apple will announce its fiscal second-quarter results on May 2, and the buzz surrounding the tech giant has been muted this year. From a stock perspective, the decline that began in late January has had several negative repercussions. Many investors believe that Apple’s sudden decline could bring down the entire tech industry and the entire S&P 500 index. However, that did not happen as the semiconductor and other industries continued to advance during that time. Suddenly, the commentary shifted to Apple no longer being important in the market. This is nothing new. Investors have become so accustomed to stocks hitting new highs every year that when it doesn’t happen, anxiety grows. That said, there are some charts that suggest APPL may be on the verge of a rebound. DOWNSIDE TARGET ACHIEVED AND POSITIVE MOMENTUM DIVERGENCE Firstly, the stock reached its downside target based on a cautious move from the top pattern that broke down in early March. There is also a positive momentum divergence at play: As the stock made lower lows, the stock’s 14-day relative strength index made higher lows. Often, momentum leads to price increases at key turning points. AAPL vs. Its 200-Day Moving Average AAPL has been trading below its 200-day moving average for more than two months. In fact, it has spent more time below its long-term moving average over the years, but retracements to that line have spawned new strength in the past. This chart illustrates the key moments when AAPL moved back from its moving average, leading to continued gains. Big Top Pattern Not Bearish Another potential positive is that Apple has a big bearish top pattern on its weekly chart. Yes, it can be positive. This may sound strange to a technical analyst who focuses on chart patterns, but here’s why. Often, the most inauspicious chart patterns are not seen. The reason is that it takes a lot of weakness to make a big top pattern and the stock is already wiped out enough when it crashes. This event also happened in 2022. The stock struggled briefly during that time (like every other stock), but as the chart shows, a series of negative breakouts in a big bear pattern were short-lived. In other words, after a false crash, buying will increase in price, which is what has worked for AAPL recently. Past performance is no guarantee of the future, but given the declines that have occurred, mean reversion is more likely. Needless to say, in a long-term uptrend, AAPL is much higher today than it was 10, 20 and 30 years ago. We don’t need to list extraordinary percentage gains to prove it. But it’s important to understand that the stock hasn’t always reached all-time highs. In fact, it spends most of its time consolidating to new heights – just like now. In other words, a good strategy for Apple (or anything in a long-term uptrend) is to buy dips in long-term trends. Again, this is not a quick trade before an earnings report. Anything can happen in a week. But if Apple’s long-term trend holds, continuing to take advantage of the short-term hiatus would be a thoughtful and potentially fruitful strategy. Disclosure: Cappelli personally owns AAPL stock. The above is subject to our terms and privacy policy. This content is for informational purposes only and does not constitute financial, investment, tax or legal advice or a recommendation to purchase any security or other financial asset. The content is general in nature and does not reflect the unique personal circumstances of any individual. The above may not apply to your specific situation. Before making any financial decisions, you should strongly consider seeking advice from your own financial or investment advisor. Click here to view the full disclaimer.
