Chart of the week: Apple is trapped in a range but a breakout above $466 could be very bullish

From its all-time high on 21 September 2012 of $693.21, Apple’s stock declined by 44.8%, eventually reaching a low of $382.57 on 19 April this year. Having encountered major support (buying), the stock rallied until late last week when it encountered minor resistance (selling) at around $463.

The chart below shows Apple’s price action over the past 2 years. The volume by price overlay on the y axis shows that in late 2011 a major battle took place between the bulls and bears, with the bulls eventually winning the day. This established the price area as logical support for Apple, and it is where the stock finally bounced after its seven month declined.

Also shown on the chart are the 20-day moving average (blue line), and the 45-day moving average (red line). When these simple overlays cross, as they did in October 2012 (circled), they can mark a major trend change, and this has proven to be the case with Apple.

A 2 year (daily) chart of Apple (Click on the chart for a larger version)

A 2 year (daily) chart of Apple (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Apple is temporarily trapped in a range, and to get anything going to the upside the stock needs to breakout decisively above $466. However, if such a move were to occur (particularly once it is accompanied by a moving average cross), it could be potentially very bullish for the stock which is already attracting both value and income investors.

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