Apple (AAPL) shares were trading lower in extended trading Tuesday after the company reported earnings, and while the fundamental call is still being debated, the initial bias was to the downside. Over on Real Money, Jim Cramer takes a close look at this Action Alerts PLUS stock's revenue, earnings growth, balance sheet and dividend capabilities and says Apple should be graded like a consumer product company. Get his insights with a free trial subscription to Real Money.
Technically, Apple is overbought, but it has been that way for most of the year, and by the end of trading on Wednesday, the market's view on the stock could go through several iterations. If it were to pull back from its pre-report level of $147.51, it is important to have some idea where technical support may be located on the chart.
The weekly chart shows the stock rising off its 2013 low to its 2015 high and then retracing 50% of that gain over the next year, before bouncing off the 200-day moving average and resuming its uptrend. That move rebound accelerated after taking out the 2015 highs and year-to-date the stock is up 28%, while the Technology Select Sector SPDR ETF (XLK) is up 14% over the same period. The chart is overlaid with a trend indicator called the Andrews Pitchfork, which plots a trend line equidistant from a reaction high or low, which can be used as a support or resistance line.
In this case, the stock has moved up into centerline resistance. The slope reading is the highest it's been over the history of the chart, which simply means that the stock price has moved above the regression line, or best-fit a straight line of price. Slope along with the relative strength index reading are indications of the extent of the oversold condition.
On this time frame, money flow is still positive, and a reminder that a stock can stay overboard or oversold for extended periods of time, although the horizontal volume-by-price bars reflect a decrease in overall volume over the last three months. There is little in the way of technical support on this chart until the area of the 2015 highs and the 38% Fiboaacci retracement level of the 2016 low and 2017 range, but there is an earlier support level on the daily time frame.
The area of daily support is positioned between the uptrend line drawn off the lows of the last two months and horizontal resistance at the $140 level, and it contains the 50-day moving average. Below that is a support vacuum until the February gap, which is aligned with the weekly support area. Moving average convergence/divergence and the relative strength index have been tracking in bearish divergence to price on this time frame, along with Chaikin money flow, which is well into negative territory.
The stock is overbought and has diverted from its two 200-day moving average by a wide margin, but again stocks can remain overbought long enough to make trend lines and indicators irrelevant. This analysis is not a suggestion to short Apple. It is simply a review of the technical status of the stock and particular levels of interest to holders and traders of Apple.