Technical analysis of AAPL
AAPL, the representative CFD based on Apple’s shares, moved down again yesterday amid a general decline in tech shares and some nervousness across the board in markets as pro-Trump protestors rioted in Washington. Apple’s bottom line remains strong, though, with total sales in the App Store amounting to $1.8 billion for the week from Christmas to New Year’s Day.
Apple’s actual price:earnings ratio for 2020 was 38.6, making it about average for overvaluation by this measure among major tech shares. The third quarter’s earnings per share (EPS) was 73c, slightly better than the consensus of 69c. Furthermore, Tuesday saw Credit Suisse raise its target for AAPL to $120 from $106.
On the chart, the latest high around $138 might serve as a resistance if another upward movement develops over the next fortnight or so. To the downside, $120 is an obvious psychological area, but any attempt on this depends on today’s trading and whether the current test of the 50 SMA might succeed.
Technical indicators on AAPL H4
Moving averages continue to give a buy signal, with each of the 50, 100 and 200 SMAs successively above slower lines. The two primary value areas have expanded significantly since the middle of last month.
However, price is currently testing the 50 SMA from Bands. This had previously been a strong support since early November, with price running consistently above it. The outcome of this attempt to push lower is likely to be key over the next few days – one might reasonably expect many traders to buy in around the current zone ‘at a discount’.
There is no signal of saturation from either Bollinger Bands (50, 0, 2) or the slow stochastic (15, 5, 5) on this chart, but the latter at about 24 is very close to the oversold zone. We can also observe a spike in buying volume overall this week. These factors would traditionally confirm a buy signal for a blue-chip share; however, traders should not rely too heavily on volumes given the generally low volume for CFDs on shares.
Price action and Fibonacci
The very long tail of the candle that initially tested the 50 SMA from Bands on Monday from 16.00 GMT, easily the longest on this chart, seems to confirm this line as a support. We can also observe an attempt to close the gap downward yesterday morning. Confirmation of a buy signal should be sought by observing the first candle of today’s session.
We cannot yet say that the 50% area of the weekly Fibonacci fan has been broken decisively: a move back above it could lead to its reestablishment as a support. The 38.2% zone from the same fan remains the medium-term target slightly below $150; however, a significant challenge would be likely to come from the latest high (just above $138) if momentum upward increases significantly. To the downside, a bounce from the 61.8% area of the fan is favourable if a deep retracement develops.
Technical analysis of AAPL: summary
The key fundamental event awaited by traders of Apple’s shares is the upcoming earnings announcement for the fourth quarter of 2020. This is expected on 26 January with a consensus estimate for EPS of $1.39 against Q4 2019’s $1.25.
Overall, the technical picture for AAPL remains very positive, with a retest of the latest high in view sooner or later. On the other hand, the length and depth of the ongoing consolidation remain in question, so choosing to buy here is likely to require preparedness to hold the position for some time.
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