Last Monday, I highlighted a key price support zone for Apple stock (AAPL): 115-118. That zone represented lateral support (late November ’14 highs and February ’15 breakout) as well as the longer-term 2 year uptrend line (around 115ish).
That AAPL price support zone broke down last week. And today, Apple stock dipped as low as 109.63 before reversing back up and rallying to around 114 (mid-day). Guess where that 109.63 level was? Within pennies of the January 27/28 earnings gap fill. Here’s what I wrote last week:
A move lower would likely target the open gap from the late january earnings “beat”.
Today’s reversal is likely setting up for a bearish backtest of the “breakdown” area. Or as I like to call it: “the scene of the crime”. Although this sets up for a short-term “trade” higher, the move is typically sharp and often makes for a nice risk-defined short setup into the breakdown area. If this is indeed a bearish rally higher, then the retest will likely fail around 118 to 120 (120 is also near the 50 day moving average).
It is fair to note, however, that a daily close above the 50 day moving average would neutralize the near-term selling. This would likely buy Apple some time before its next setup/move.
Apple Stock (AAPL) – Daily Chart
The weekly chart shows a puncture of the trend line dating back to June 2013. This is a shot across the bulls bow. The bulls are hoping this reversal is a bear trap and that it leads to a move back above 120 that regains and holds the uptrend line. Meanwhile, the bears are looking for a failure on the “backtest” of the 118-120 zone.
Apple Stock (AAPL) – Weekly Chart
Thanks for reading and best of luck out there.
Twitter: @andrewnyquist
The author does not have a position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
