Apple shares could be primed for a rebound, according to the charts

Published Wed, Apr 24 202412:54 PM EDTUpdated Wed, Apr 24 20242:26 PM EDT

Apple , the most important name in the stock market, has not been acting like it recently. That could change. Apple reports fiscal second-quarter results on May 2, and the chatter surrounding the tech giant has not been great this year. From a stock perspective, the decline that started in late January generated a host of negative reactions. Many investors thought AAPL's sudden collapse could take down the whole tech sector and the S & P 500 overall. With semiconductors and others continuing to charge forward back then, though, that did not happen. Suddenly, the comments turned to AAPL not being that important to the market anymore. This isn't anything new. Investors have gotten so used to the stock making new highs every year that during the times in which this doesn't happen, concerns intensify. That said, there are some charts that suggest APPL could be due for a rally. Downside target hit and positive momentum divergence First, the stock already has hit a downside target, based off a measured move from the topping pattern it broke down from in early March. There's also a positive momentum divergence in play: The stock's 14-day relative strength index indicator has been making higher lows as the stock made a lower low. Oftentimes, momentum leads price at key inflection points. AAPL vs. its 200-day moving average AAPL has also been trading below its 200-day moving average for more than two months. Indeed, it has spent more time below the long-term moving average over the years, but reclaiming the line has triggered newfound strength in the past. This chart depicts the key moments since — when AAPL's crossing back above the moving average has led to extended rallies. The big topping pattern is not bearish Another potential positive is that Apple is sporting a big bearish topping pattern on its weekly chart. Yes, this could be a positive. This may sound odd coming from a technical analyst who focuses on chart patterns, but here's why. Oftentimes, the most ominous-looking chart formations don't play out. The reason is that it takes a lot of weakness to even construct a big topping pattern, and by the time the breakdown happens, the stock already has become sufficiently washed out. This phenomenon took place in 2022, too. The stock struggled for a while back then — like everything else — but as the chart shows, the multiple downside breaks below the big bearish pattern were short-lived. Said differently, buying the price flips higher after false breakdown has worked for AAPL lately. Past performance guarantees nothing for the future, but the odds for a mean-reverting move are higher given the decline already in place. Long-term uptrend Needless to say, AAPL is a lot higher now than where it was 10, 20 and 30 years ago. We don't have to list the other-worldly percent gains to prove this point. But it's important to recognize that the stock hasn't been making new all-time highs the whole time. In fact, it has spent the majority of time consolidating under new highs — like now. In other words, a good strategy for AAPL, or anything in a very long-term uptrend, has been to buy weakness within the long-term trend instead. Again, this isn't about a quick trade in front of its earnings report. Anything could happen in a week. But if AAPL's long-term trend is going to persist, then continuing to take advantage of short-term respites would be a thoughtful and potentially, rewarding, strategy. DISCLOSURES: Cappelleri personally owns AAPL stock. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL'S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.