Apple Inc. (NASDAQ: AAPL) shareholders cheered the company’s recent Q3 earnings and revenue beat, but one look at the stock’s chart shows that Apple has a lot of technical resistance to overcome in the short-term and could potentially be in the late stages of a very bearish technical pattern. Here’s a look at the hurdles Apple is currently facing from a technical analysis perspective.
The head and shoulders
Many chart technicians focus on very short-term trading patterns and trends. However, focusing too much on the short term can leave you blind to powerful longer-term formations that could be forming in the charts.
Apple may currently be a perfect example of this mistake. On a two-year chart of the stock, Apple appears like it could be forming a broad head and shoulders pattern, a bearish technical formation that typically means the end of a long-term rally. Prior to early 2015, Apple’s stock had been in a strong uptrend since mid-2013.
The potential left shoulder on in Apple’s chart was the stock’s peak at $118.25 in late 2014. The broad head of the formation was its climb to $130+ throughout 2015. After pulling back to the $107 range (aside from its brief one-day drop to $92 on the Black Monday selloff in August), the post-earnings rally has once again carried Apple to around $119. This level is almost exactly the peak of the left shoulder of the formation and could represent a short-term top in Apple’s stock.
Not only is Apple facing resistance at the $119 level from the head and shoulders pattern, the stock is also nearing its 200-day simple moving average at $120.95. In addition, the 50-week SMA is currently at $119.47. All of these factors combine to make the $119-121 region a significant source of short-term resistance for Apple.
ANOTHER TOP FORMATION
As if the head and shoulders formation weren’t bad enough, Apple’s peak in July at $132.37 was followed the next day by…
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