Why Apple Looks Ready To Break Trend And Fly Higher

Apple Inc. AAPL attempted to break up from a falling channel pattern on Friday but rejected the upper descending trendline of the pattern, like Benzinga pointed out was likely to happen on Oct. 12.

The technology giant is expected to launch several new products in the fourth quarter, including its all-new M2 iPad Pro, a new entry-level iPad and a new version of its MacBook.

The new iPad Pro’s M2 chip will process at speeds 20% faster than the previous version, which ran on Apple’s M1 Chip. The new entry-level iPad will come with a USB-C port and 5G support.

Despite the upcoming launch, Apple will need the market to cooperate in order to break up from the falling channel pattern on higher-than-average volume.

The pattern is bearish for the short term but can be bullish down the road.

• For bearish traders, the "trend is your friend" (until it's not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
• Bullish traders will want to watch for a break up from the upper descending trendline, on high volume, for an entry. When a stock breaks up from a descending channel, it's a powerful reversal signal and indicates a rally is likely in the cards.

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The Apple Chart: The Cupertino, California-based company fell into a downtrend within a descending channel pattern on Aug. 16.

Although the stock has been making a fairly consistent series of lower highs and lower lows, if Apple is able to break up bullishly from the falling channel, a higher high may print, which would negate the downtrend.

Higher prices looked likely to come on Monday because when Apple formed its most recent lower low on Thursday, bullish divergence developed on the chart. Bullish divergence occurs when a stock makes a series of lower lows, but its relative strength index makes a series of higher lows.

• In order for the bullish divergence on Apple’s chart to correct, the stock will either need to form a higher low or a higher high. In either case, Apple’s current downtrend is likely to be negated for at least a short period of time.
• On Monday, Apple opened inside Friday’s trading range, which has set the stock into an inside bar pattern on the daily chart. If the stock breaks up bullishly from the falling channel pattern, a break from Friday’s mother bar could help to propel Apple higher.
• Apple has resistance 143.51 and $146.41 and support below at $139.96 and $137.33.