Chart of the week: will Apple’s share price test previous highs?
Our chartist thinks its future looks bright for the tech giant ahead of its Q4 earnings report.
26th October 2020 13:43
by John Burford from interactive investor
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Tech giant is due to release an earnings report this week, and our chartist thinks its future looks bright.
Apple (NASDAQ:AAPL) critical pandemic-affected fiscal Q4 earnings report is set to be issued on 29 October – and will be carefully scrutinised by analysts, as usual. Since I am a technical analyst, I am relieved of that chore – thank goodness!
I have never been accused of poring over a single spreadsheet in my life, but rely on the beautiful pictures and patterns revealed in the price charts. For me, almost everything I need to know is contained there.
And the Apple charts do appear to be poised for another move higher, despite possible short-term volatility. Here is the four-hour chart showing the form of the decline off the 2 September all-time high (ATH):
Source: interactive investor. Past performance is not a guide to future performance.
I see a clear three down off the ATH with a large momentum divergence that usually signals a sharp reversal, which is in progress.
Last week, the market came down off the Fibonacci 62% retrace of the previous wave to touch my blue trendline in what may be a typical ‘kiss’ before shooting higher in a ‘scalded cat bounce’.
So that is my most bullish scenario that will apply if or when the market resumes its uptrend from here around the $114 (£84.5) mark. That should occur this week.
The alternate scenario is for the market to drop sharply below the blue trendline making this a line of crucial short-term importance. So now, we have a line in the sand at the $114 area that we can use to set a sensible stop loss if my bullish scenario is wrong.
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For traders, having such a technically important point is extremely useful since it has a logical basis based on the chart patterns displayed.
The blue trendline is valid as a line of short-term support since it possesses several very accurate touch points when it was a line of resistance.
But of course, no forecast can possibly be 100% reliable – we work with the odds of success for various scenarios. And. to my mind, the bullish outlook appears most favourable, and I have a low risk trade.
For more information about Tramline Traders, or to take a three-week free trial, go to www.tramlinetraders.com.
John Burford is the author of the definitive text on his trading method, Tramline Trading. He is also a freelance contributor and not a direct employee of interactive investor.
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