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How to Trade Apple Stock After 27% Rebound From Lows

Apple stock has rebounded, but is it finally running out of gas? Let's look at the charts for clues.

Apple  (AAPL) - Get Report and Microsoft  (MSFT) - Get Report often go back and forth for the market-cap crown. As a result, both stocks play an important role in sentiment when it comes to trading.

They combine for more than $2 trillion in market cap, a good reason they command so much attention. 

Both stocks are trading similarly on the day: They're struggling to remain above break-even as the S&P 500 is rallying 2.5% to its highest level in more than a month. 

The index is up almost 30% from last month’s low, but some investors feel that this rally has gone too far, too fast.

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Earlier Thursday we took a closer look at the technicals for Microsoft. With Apple and Microsoft stocks lagging, let’s take a closer look at the charts.

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Trading Apple Stock

Daily chart of Apple stock.

Daily chart of Apple stock.

After rallying 27% from the lows, Apple momentum is waning. Depending on a trader’s bias, views surrounding this pause differ. Bears may argue that the stock has run out of steam and is set to pull back. Bulls could argue that Apple is simply consolidating before continuing higher.

Remember, though, traders are in the reactionary business, not the prediction business. Therefore, we must go from level to level and not fight the price action.

Should Apple continue higher, we need to see it reclaim $270. As you can see on the daily chart above, that’s where the 50% retracement comes into play. 

Above that and the 61.8% retracement may be on the table, which sits near $280, as well as the 50-day and 100-day moving averages.

Upon first test of this area, it’s hard to imagine Apple stock pushing through it without any resistance. If it were to do so, $300-plus would be possible. On a pullback, I want to see if the 200-day moving average acts as support.

Weekly chart of Apple stock.

Weekly chart of Apple stock.

If it doesn’t, it puts the $240 level and 50-week moving average in play, as you can see on the weekly chart above. 

If Apple stock continues to move lower, it brings up an interesting area on the longer-term charts. Specifically, the $215-to-$225 area is of great interest to me, as this was the prior breakout zone in October and support last month. It’s also where the 100-week moving average rests.

I would expect the $215-to-$225 area to be support for Apple, should it correct that far. From here though, remember to react to the movements, rather than trying to force the stock to go in a certain direction. There’s only one loser in that situation ... and it isn’t the market.