Apple's Sideways Action Is Likely to Continue

An earlier version of this story included a chart for Alcoa instead of Apple. We apologize for the error.

NEW YORK (TheStreet) -- Apple's (AAPL) stock traded slightly lower on Monday as it settles in near its June lows. The stock has been drifting lower since the May 22 high and is now right back in the middle of its 16-week range. Minus a volume jolt, Apple will likely remain inside this consolidation pattern in the near term.

Apple has been treading water inside a narrowing range since the powerful January surge ran out of steam in late February. The stock gained over 25% during this bull run, a move that pushed it well into overbought territory. In early March, a healthy consolidation began.

The initial pullback retraced a third of the early 2015 rally as it marked the March low at $121.65. Apple has remained above this level, putting in three straight higher monthly lows in the process. On the upside, the stock challenged the initial 2015 peak at $133.60 in late April, but lacked the momentum to power past. While remaining inside this congestion, Apple has completely worked off its overbought reading. Once this range is broken, there is strong potential for a big move.

With the bulls still in control, an upside resolution is the more likely outcome. If Apple can close above last month's high of $133, it will be set up well for a run past the 2015 peak. On the downside, last week's low of $125.60 is a level to watch. A drop below this nearby support could lead to a retest of a major support zone between $121.50 and $119.50. This key area includes the post-January-rally low on March 12 at the upper band and the 2014/January 2015 highs near the lower band.

For patient bulls, a dip down to this area prior to Apple's next earnings report on July 22 may prove to be a buying opportunity.

At the time of publication, Morrow had no position in the stock mentioned.

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