So what do you do now with Apple stock? Shares are out of bear market territory but could slip back on a minor decline today. Shares, which closed around $108 the day of the announcement, are down very slightly so far Thursday.
If you have faith in Apple, as TheStreet's Jim Cramer does, you hold on. Cramer, whose Action Alerts PLUS portfolio holds Apple, has long said you own Apple, you don't trade it. So he's bullish on the stock and recently stated he is going to buy an iPhone 7.
But what if you want to trade Apple? That's when you look at the stock's daily and weekly charts and key trading levels and decide whether to buy the stock on weakness or to sell the stock on strength.
The weekly chart for Apple has been positive since July 15, which was reason enough to have been long the stock pre-release of the iPhone 7. The daily chart also supported a long position with the stock above its 38.2% Fibonacci retracement of $106.71. In addition, the stock began the week confirming a "golden cross."
A "golden cross" occurs when the 50-day simple moving average rises above the 200-day simple moving average and indicates that higher prices lie ahead. This means that the stock should be bought on weakness to the 200-day simple moving average at $102.43.
Here's the daily chart for Apple.
Courtesy of MetaStock Xenith
Apple closed Wednesday up 2.9% year to date and in bull market territory 21.1% above its May 12 low of $89.47. The stock is 19.5% below its all-time intraday high of $134.27 set on April 28, 2015, so it won't take much weakness for the stock to return to bear market territory.
The daily chart for Apple shows the Fibonacci retracement levels of the decline from the all-time high of $134.54 set on April 28, 2015 and the 2016 low of $89.47 set on May 12.
Apple had been under a "death cross" since Aug. 26, 2015 when the stock closed at $109.89. A "death cross" occurs when the 50-day simple moving average falls below the 200-day simple moving average signaling that lower prices lie ahead and that investors should sell strength to its 200-day simple moving average.
The stock tested its 200-day simple moving average at $121.84 on Nov. 3 and then on April 4 when the average was $111.32. Now the stock is above a "golden cross" so its buy weakness to the 200-day simple moving average at $102.43.
Looking at the retracements, the stock struggled with its 23.6% retracement of $100.13 between May 26 and July 26. A positive reaction to earnings had the stock gap higher on July 27 and the stock has been trading back and forth around its 38.2% retracement of $106.71 since then.
Here's the weekly chart for Apple.
Courtesy of MetaStock Xenith
The weekly chart shows a red line through the price bars, which is the key weekly moving average (a 5-week modified moving average). The green line is the 200-week simple moving average considered the "reversion to the mean."
The study in red along the bottom of the chart is weekly momentum (a 12x3x3 weekly slow stochastic), which scales between 00.00 and 100.00, where readings above 80.00 indicates overbought and readings below 20.00 indicates oversold. A negative weekly chart shows the stock below its key weekly moving average with weekly momentum declining below 80.00 in a trend towards 20.00.
The weekly chart for Apple is positive but overbought with the stock above its key weekly moving average of $105.61 and above its 200-week simple moving average of $93.99. This "reversion to the mean" was a magnet between the week of April 29 and the July 1. The weekly momentum reading is projected to end this week at 86.41 virtually unchanged from the 86.44 reading of Sept. 2.
Investors looking to buy shares of Apple should do so on weakness to $102.80 and $96.66, which are key levels on technical charts until the end of 2016 and until the end of September, respectively.
Investors looking to reduce holdings should consider selling strength to $110.22 and $124,12, which are key levels on technical charts until the end of 2016 and the end of September, respectively.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.