Apple (AAPL) and Tesla (TSLA) shares are attempting to reverse the downside momentum in both stocks since coming off their April highs. Each stock has returned to an important individual level of Fibonacci support on their daily charts. The integrity of these support lines will be a key factor in determining the direction of these stocks over the intermediate term.
The daily Apple chart shows the stock making a series of lower highs above horizontal support in the $92 area, which is also a 50% Fibonacci retracement level of the 2013 low and the 2015 high range. Earlier this year the stock retested that support and began forming a series of series of long tail candles and ultimately solidifying a base.
The relative strength index and the money flow index, a volume-weighted relative strength measure, both moved out of oversold conditions and above their 21-period moving averages. A subsequent move in the stock price back above the 50-day moving average helped power it through the 38% retracement level of the 2013 and 2015 range and back to the declining 200-day moving average and the downtrend line drawn off the 2015 highs. At this point in time, the relative strength index and the money flow index were both exiting overbought conditions, and the stock quickly reversed direction, gapping first below its 200-day moving average and then below its 50-day average and returning to the 50% retracement level.
Apple shares are trying to repeat the hold-and-base process. Another cluster of long tail candles have formed at support, and the relative strength index and the money flow index have now moved into complimentary oversold conditions. Ultimately, the stock will have to gain some upward momentum, break above the 38% retracement level and sustain the move through the long-term downtrend line to confirm a reversal in the longer term trend.
"We remain confident in Apple and will continue to hold this name for the long term. Apple isn't simply a hardware company; it is an ecosystem that engenders long-term loyalty and constantly innovates on behalf of its customers. To those who have already written Apple's obituary, we and Tim Cook could not disagree more."
A different 50% level is being tested on the Tesla chart, part of a set of Fibonacci retracements measured off this year's high and low range and currently reinforced by the intersection of a downtrend line drawn off the 2015 highs. The price momentum and money flow indications were in overbought conditions as the recent highs were being made, but they have rapidly returned to their oversold zones, in the same way as the indicators on the Apple chart.
Tesla shares underperformed the strong broader market in Tuesday's session, forming a weak-looking hammer candle on the support line. The stock needs to produce some positive price action at this critical juncture or run the risk of a serious technical breakdown and a further deterioration, which could see a retest of this year's lows.