A Look At Apple As The Stock Consolidates Under This Bellwether Indicator

Zinger Key Points
  • Apple is consolidating under the 200-day SMA, which is a bellwether indicator.
  • The stock could be settling into a bull flag pattern on the daily chart.

Apple Inc AAPL opened lower on Monday, falling 0.75% to start the trading session in tandem with the general market, which saw the S&P 500 slide off the open before bouncing to trade flat.

The tech giant has been trading mostly sideways since Nov. 14, consolidating under the 200-day simple moving average (SMA).

The holiday-shortened week may see lower-than-average volume across the major indices, suggesting continued consolidation may take place before a big move comes in either direction.

The 200-day SMA is an important bellwether. Technical traders and investors consider a stock trading above the level on the daily chart to be in a bull cycle, whereas a stock trading under the 200-day SMA is considered to be in a bear cycle.

The 50-day SMA also plays an important role in technical analysis, especially when paired with the 200-day. When the 50-day SMA crosses below the 200-day SMA, a death cross occurs whereas when the 50-day SMA crosses above the 200-day, a bullish golden cross takes place.

The S&P 500 has also been trading under the 200-day SMA, which Benzinga called out was likely to happen for a period of time on Nov. 13. If Apple is able to regain the area as support, the S&P 500 may follow suit.

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The Apple Chart: Apple broke up bullishly from a falling channel pattern on Oct. 21 and enjoyed a short-term bull cycle before entering into another bear cycle. At the bottom of the most recent bear cycle, which ended on Nov. 9, the stock tested the upper trendline of the channel as support and reversed course into another uptrend.

  • The uptrend brought Apple to just under the 200-day SMA and since then, the stock has been consolidating. The uptrend paired with the consolidation may have set the stock into a bull flag pattern on the daily chart, with a measured move of about 14%.
  • If Apple breaks up from the bull flag pattern, the measured move indicates Apple could soar up toward $167. If the stock continues to trade lower within the flag pattern for a few more days without breaking up from the upper trendline or closes a trading day under the eight-day exponential moving average, the pattern will be negated.
  • If Apple closes the trading day above $149.20, the lower wick could indicate a bounce will come on Tuesday. If the stock closes the trading session near the low-of-day, Apple will print a bearish Marubozu candlestick, which could indicate lower prices are on the horizon.
  • Apple has resistance above at $150 and $153.92 and support below at $146.41 and $143.51.
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