October is off to a rough start for stocks. In the first three trading sessions of the month, the big S&P 500 index is off by more than 2.6%.
But that correction is less ominous than it may first appear. In fact, there's a lot of evidence that a dip in the S&P 500 here could set the stage for another leg higher in the final stretch of 2019. That means that investors could be staring down an important buying opportunity for stocks in October.
And that's more true for some stocks than others.
Take Apple (AAPL - Get Report) . The stock has been in a leadership role in this market all year long, rallying more than 40% on a total returns basis since the calendar flipped to January. Now, as the broad market convalesces, Apple is teetering on the verge of a breakout higher.
To figure out how to trade it, we're turning to the charts for a technical look.
Apple has spent most of 2019 in a well-defined uptrend, giving investors a textbook example of a "buy the dips" stock. Following the last major buyable bounce back in early August, Apple has been pressing up toward all-time highs, setting up a textbook bullish continuation setup.
Apple is currently in the middle of forming an ascending triangle, a bullish continuation pattern that points to more upside ahead. The setup is formed by horizontal resistance up above shares at $225, with uptrending support to the downside. Basically, as Apple bounces in between those two technically significant price levels, shares have been getting squeezed closer and closer to a breakout above that $225 price ceiling.
If and when that breakout happens, we've got a clear signal that buyers are back in control of shares just below all-time highs, clearing the way for a new potential high water mark.
Relative strength continues to be one of the most important indicators to pay attention to right now. And in Apple's case, it continues pointing up and to the right, indicating that shares are systematically outperforming the broad market, even now.
If shares can muster the strength to break above $225, it looks like as good a time as any to build a position in Apple. Stay tuned.