Apple has been trending higher in the last several weeks, hitting a lifetime high at the $431 area in the process. Since then the stock has been in the process of consolidating gains.
Previous bullish patterns in AAPL that I have discussed in the last couple of months have either completed or failed through time exhaustion. In the daily time frame, there isn't a lot for us to go on.
So where does that leave us in projecting how the stock might move after Apple's earnings report after today's close?
Because we don't have much to fall back on within the daily chart, a move out to the next biggest common time frame--the weekly view--makes a lot of sense. When we do that, as we can see on the chart below, the broader context of how the stock has moved is apparent.
The big sloping lines on the chart are channel lines that I have drawn in, extending back into 2009. From this perspective it is pretty clear that gyrations in the stock have been contained within the channel. This is important because it gives us a good sense of the boundaries of the established trend.
By extending those channel lines, we can also see two important factors. The first is that the current price is almost exactly in the middle between the channel's extremes.
This suggests that traders haven't been pushing the stock up as hard as might be assumed from the daily view. Instead, this is a relatively conservative midway point that so far doesn't indicate a strong opinion as to how the shares might break after the earnings results.
Second, there are two big boundary areas from the top and bottom of the channel. The zone at the top is around $460 to $465, which might become the upper limit on a big move on positive news.
The lower bound is at the $370 area, though it isn't that clear on the chart. That is also roughly in line with the 50-week moving average. The $370 area is likely to be the downward limit on disappointing news.
(Chart data provided by Thomson Reuters)
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