Apple Flies In Blue Skies, Attempts To Break From Pattern: A Technical Look At The Stock

Apple Inc AAPL was trading in blue skies Wednesday, reaching a new all-time high and approaching a $3 trillion market cap.

The stock had been leading the market higher since mid-March, trading in a strong uptrend within a rising channel pattern and attempting to break up from the formation.

All-time highs generate excitement and interest that can translate into increased buying pressure and above-average volume.

When a stock reaches an all-time high there is no oversupply, meaning every trader and investor in the stock is in a green position and there are no bag holders. Because the stock has never traded in the range, there is also no price history to act as resistance. This can equate to some traders making emotional-based decisions, which can lead to unexpected share price behavior.

RSI: The above-average volume on a stock reaching a new all-time high often raises the relative strength index (RSI) to near or above the 70% mark indicating consolidation is needed. When a stock’s RSI exceeds 70% it is in overbought territory which is a sell signal for technical traders.

Short-term traders may choose to exit their positions and reenter on the higher low, which helps to create some selling pressure.

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The Apple Chart: Apple has attempted to break up from its rising channel pattern on multiple occasions but each time, the stock has fallen back into the pattern. On Wednesday, Apple was attempting to break up from the pattern again and was looking to print a bullish Marubozu candlestick, which could indicate higher prices and a true break from the pattern could come on Thursday.

• Apple’s RSI is measuring in at about 71%, putting the stock in overbought territory but its RSI has been trending lower since June 15 while the stock has trended higher, which has caused bearish divergence to form. The bearish divergence suggests a retracement for the stock is on the horizon.
• Bullish traders want to see Apple continue higher before coming back to test the upper trend line of the pattern as support, which could suggest a longer-term run to the upside is in the cards. Bearish traders want to see Apple eventually print a bearish reversal candlestick and fall back into the channel pattern, which could provide a solid short-term trade.
• Apple has resistance above at the psychologically important levels of $190 and $200 and support below at $184.95 and $182.94.

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