Apple (AAPL) - Get Report beat expectations for earnings and revenue this week, vaulting the stock to its highest levels since April. Despite this, the stock is still trading well below its all-time high, which was set over a year ago.
While Apple managed to outperform analysts' projections, the company's latest earnings and revenue beat had more to do with low expectations than it did with outstanding performance. Will the stock continue to run higher, or is Apple about to turn sour?
In a sense, Apple is a victim of its own success. The company's flagship phone and tablet products have been popular for years, leading to legitimate concerns about potential market saturation.
On the other hand, the company that became famous for innovation has failed to move the needle with its new products. In this sense, Apple is like a popular band that is still heard constantly on the radio, but hasn't had a new hit in years.
Technically speaking, the stock presents a muddled picture. Apple's weekly chart demonstrates the power of a moving average -- in this case, the stock's 200-week moving average (red). That indicator has acted as support on numerous occasions (arrows), and has held up particularly well since the start of the year.
Despite this recent strong move, the technical picture for this stock is mixed. In order for the rally to continue, Apple now must break its long-term downtrend by climbing above its bearish trendline (black dotted line).
According to the stock's MACD (moving average convergence divergence) indicator, that break could occur soon. Apple's weekly MACD flashed a buy signal earlier this month (shaded yellow).
Meanwhile, on Apple's daily chart, the stock finally managed to close above its 200-day moving average (green) for the first time since April. Notice how the moving average closely mirrors the bearish trendline.
The stock has formed an island gap, which actually consists of two gaps (A and B). The gap leaves behind a bullish double-bottom pattern, which presaged Apple's bullish post-earnings move.
Although the stock has gained over 12% since June 27, it trades at less than 12x next year's anticipated earnings. With a reasonable valuation, $231 billion in cash and cash equivalents, a loyal customer base, and one of the world's most recognizable brands, it would be risky to assume that Apple's best days are behind it.
Editor's Note: This article was originally published at 9 a.m. EDT on Real Money on July 29.