Apple Settles Into 2 Bullish Patterns Mid-Week: The Bull, Bear Case For The Stock

Zinger Key Points
  • The iPhone maker is trading in a rising channel pattern and an inside bar formation on declining volume.
  • Bulls want to see the stock break up from both patterns on higher-than-average volume.

Apple, Inc AAPL closed mostly flat Tuesday, within a rising channel pattern and inside bar formation, which Benzinga pointed out was a likely scenario on July 10.

The Cupertino, California-based company’s two patterns are bullish, at least for the short-term. An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."

A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

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The Apple Chart: On Monday, Apple attempted to break up again from the rising channel pattern but rejected the upper trend line and closed under Thursday’s high-of-day. After rejecting the top of the channel, Apple consolidated on Tuesday by printing an inside bar pattern on declining volume.

  • Apple has been trading in a fairly consistent uptrend since March 2, making a series of higher highs and higher lows. The stock’s most recent higher high was formed on Monday near $194 and the most recent higher low was printed at the $189.63 mark on Friday.
  • Bulls want to see Apple break up from the inside bar pattern and the channel on higher-than-average volume and then for bullish momentum to come in and drive the stock to a new all-time high. Bearish traders want to see Apple eventually break down from that pattern on high volume, which could suggest a longer-term downturn.
  • Apple has resistance above at $194.48 and the psychologically important $200 level and support below at $189.61 and $182.94.
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