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Apple's Stock Technical Outlook Is Brighter Than It May Seem

Wayne Duggan

Following news of China’s retaliation against the latest round of U.S. tariffs on Monday, Apple, Inc. (NASDAQ: AAPL) was hit again when the U.S. Supreme Court ruled shareholder antitrust lawsuits related to its App Store practices can proceed.

Apple has now dipped into technical correction territory, down more than 11 percent from its May high of $214.48. Apple's stock may be under technical pressure in the near term, but the longer-term chart still looks very bullish.

Correction Territory

This week, Apple officially dipped into correction territory, classically defined as a pullback from recent highs of between 10 percent and 20 percent. The bad news for Apple bulls is that the stock clearly has negative near-term momentum. Shares dropped below both the 50-day and 200-day simple moving averages for the first time since January.

Shares have bounced off the $185 level this week, the same place Apple found support in late March. It wouldn’t be surprising to see the stock break below $185 if Tuesday’s broad market bounce doesn’t last.

The good news for Apple bulls is that corrections are a perfectly healthy part of a longer-term bullish trend. It may seem painful in the moment, but retracements of between 10 and 20 percent allow for consolidation and set the table for the next leg of a bull market.

Golden Cross

One technical indicator providing comfort for Apple bulls is the golden cross that occurred in Apple’s chart earlier this month. Apple’s 50-day SMA crossed above its 200-day SMA, a typically bullish technical indicator. This latest cross is Apple’s first since late 2016. The last time Apple experienced a golden cross, Apple stock rallied from around $100 to as high as $230 over the two years that followed.

“I’m usually not a big fan of that indicator but it’s been a very compelling one for Apple,” Miller Tabak analyst Matt Maley said on CNBC Tuesday. “So if this stock can turn back up, that indicator would tell you it just might be see a good run.”

Levels To Watch

For now, Apple traders need to be watching $185 for potential near-term support to hold. In the longer term, the $170 represents a 20 percent pullback from May highs. Below that level, Apple would transition from correction territory to a bull market. Finally, Apple found support at around $140 during the early 2019 sell-off.

For Apple to resume its bullish climb, it will need to first break back above its 50-day and 200-day SMAs at $193 and $190, respectively. A break-out above 2019 highs of $214 would be a strong signal that the longer-term bull market rally has resumed.

Apple's stock closed Tuesday at $188.66 per share.

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