Apple, Inc AAPL and Amazon.com, Inc AMZN opened slightly lower in the premarket on Thursday, in sympathy with the SPDR S&P 500 SPY, which opened down about 0.5%.
The two tech giants hold the first and third spot in terms of the SPY’s weightings, with Apple weighted at 6.7% and Amazon weighted at 2.91%.
Perhaps unsurprisingly, Apple and Amazon’s charts have a similar look to both each other and to the SPY, showing a multiday consolidation period preceded by a rebound after a long-term decline.
The SPY entered into a bear market mid-March, when the 50-day simple moving average (SMA) crossed below the 200-day SMA, creating a death cross, which made bullish traders grow cautious, especially those used to the multiyear bull cycle that ended at the beginning of 2021.
Apple held up stronger than the general markets but, nevertheless, a death cross finally formed on the stock’s chart on June 2. Amazon’s chart seemed to predict a bear cycle was on the horizon when its chart printed a death cross on Jan. 24.
Within every bear cycle, bounces to the upside occur and bullish periods take place. For traders and investors, the periods when individual stocks move anti-trend can be confusing because it’s difficult to decipher whether moves to the upside are a temporary bounce or whether the bear cycle is ending and a bull cycle is about to begin.
For technical traders, remaining agile is the key to success, and although it’s not possible to predict with certainty when a bear cycle will end, charts can help to provide clues as to whether there’s likely more upside in the short term.
From a technical standpoint, Apple and Amazon could be set to trade higher over the coming days if the possible bull flags on their daily charts become the dominant pattern. Amazon’s bull flag appears stronger because the stock has so far maintained support at the eight-day exponential moving average.
It should be noted that events affecting the general markets, negative or positive reactions to earnings prints and news headlines can quickly invalidate patterns and breakouts. As the saying goes, "the trend is your friend until it isn't" and any trader in a position should have a clear stop set in place and manage their risk versus reward.
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The Amazon Chart: Amazon’s possible bull flag pattern began on May 24, when the stock reversed course off the $101.26 mark. The pole of the formation was created between that date and June 1 and the flag formed over the trading days that have followed. The measured move, if the pattern becomes recognized, is 23%, which indicates Amazon could soar up toward the $147 mark.
- Bullish traders will want to watch for Amazon to break up from the upper descending trendline of the flag on higher-than-average volume, which would indicate the pattern was recognized.
- For bearish traders, Amazon confirmed Thursday that it’s trading in a downtrend when the stock formed a lower low under the June 2 low-of-day at the $120.04 mark.
- If the stock fails to break up from the bull flag pattern over the coming days, the downtrend may continue. If Amazon trades lower than the $113 mark, the bull flag will be negated due to the stock falling more than 50% of the length of the pole.
- Amazon has resistance above at $122.24 and $125.93 and support below at $117.16 and $109.30.
The Apple Chart: Apple’s bull flag began on May 26, with the pole formed over the first four days of that time period and the flag forming over the trading days since. The measured move of Apple’s bull flag is 10%, which indicates the stock could rise toward the $158 mark.
- Like Amazon, Apple is also trading in a downtrend within the flag formation. The pattern was confirmed on Wednesday, when the stock printed a lower high at the $149.87 level. Although on Thursday, Apple looked to be regaining support at the eight-day EMA, the stock has closed the trading day below the area on two separate occasions, making the bull flag less viable.
- Apple has resistance above at $150 and $153.92 and support below at $146.41 and $143.51.
Photo courtesy of Apple.
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