The weekly chart of Apple (AAPL) shows the six year Apple rally has been punctuated with two deep percentage corrections. These have occurred when the 10 week moving average has diverged sharply from the 40 week moving average. That same condition is in place on the chart now and it could be signalling another pullback.
The graph at the bottom of the chart shows the relationship between the two averages and is overlaid with a 40 week moving “signal” average. Crossovers have signaled changes in the intermediate term direction of price. The average line is currently making a lower high in negative divergence to the rising stock price. It looks like it is preparing for another bearish crossover below the signal line.
The overbought condition reflected in the divergence between the moving averages is punctuated by the price action over the last nine months. During this time, a nearly vertical triangle has pierced a long term resistance line drawn off the highs of the charted period. The triangle pattern has been penetrated and Apple’s stock price and moved down to the uptrend line drawn off the October 2017 low and the October 2018 low. This is the last line of defense on this chart.
Sustained price action below the $165-level could trigger the start of a deep and prolonged decline like we have seen two times in the past. A pullback to the 50% Fibonacci retracement level of the 2016 low and this year’s high would be a 25% move, and on the lower end of the two previous declines.
This analysis is a very accurate and detailed account of what has happened in past when certain technical conditions were in place. Just because similar conditions are currently in place is no guarantee Apple shares will see another deep corrective move. It is, however, a warning sign to be alert to for those who are long the stock.
(The daily chart is outlined here in this previous analysis on 1/24 last week.)