With a big gap and go rally from April to July, Apple (AAPL) has quietly made its way back into the investor spotlight. There are plenty of reasons for Apple’s recent success, but still some questions going forward. I discussed much of this in an AAPL post back in June. No need to revisit all of those themes (cash, buybacks, dividends, etc…), many of which bode well longer-term, but there is one that seems to be emerging that is worth watching. And that is the near-term technical setup.
This is simply meant to be a research update for active investors, so I’m going to keep it simple. There are three things that are concerning me over the near-term:
1) RSI Divergence – A big divergence has formed between AAPL’s price and its Relative Strength Indicator (RSI). As AAPL reached higher in June, its RSI peaked. After that AAPL’s price continued to push higher while its relative strength waned. This set the stage for the current back and fill pullback. But this needs to be watched going forward, as it often leads to lower prices.
2) Technical Troubles Developing? – AAPL needs to clear 96.50 and find a higher high. The stock price recently lost a near-term trend line (and backtested it this morning). This isn’t big news or a major event, but a failure to recapture the trend line and push above 96.50 would be a near-term caution. Lower technical support levels reside at $92/$93: $93 is the 50 day moving average and $92 represents the July lows. A sustained move through $92 would likely bring key Fibs into play.
AAPL Daily Stock Chart
3) AAPL Relative Performance to QQQ – This may be the most important. On a near-term and longer-term basis. As you can see below, Apple’s stock has performed in-line with the PowerShares QQQ Trust (QQQ). Note that QQQ is an ETF and representative of the Nasdaq 100. As you can see, AAPL outperformed in April and May, and has hung around par for the past several weeks. Now this isn’t an issue… yet. But, I’d feel a lot better about Apple’s stock if it resumed its outperformance and status as a Tech go-to leader.
One thing that may help, but is still 5 weeks away, is Apple’s next media event (Sept 9th). Speculation is that they will announce a new iPhone? If so, according to Yahoo’s Lawrence Lewitinn, AAPL’s average 6 month return after a new iPhone launch is +23%.
AAPL:QQQ Daily Ratio Chart
Thanks for reading.
Follow Andy on Twitter: @andrewnyquist
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
