My main focus on trading is crude oil, and my longer term investments are in funds and index trackers. As far as individual stock trading goes, I only engage in a handful of investments per month. However, I thought it would be interesting to look at the Apple stock price from purely a technical point of view, not taking into account any news about the latest iphone or iwatch.
The US stock market has been in a strong bull market since March 2009, using the S&P500 as the barometer. Although we have seen many major pullbacks along the way, the most recent significant pullback was in February 2016 when we sold off 15%+ from the highs. Then, since early last year, there’s been a steep and consistent rise in stock prices. Inevitably after such a long bull market, investors are beginning to ask “when is it going to end ?”
Technical analysis of AAPL chart
Apple is one the top ten largest companies in the world (ref : Forbes 2017), and among the most popular shares for investors. As it is such a big part of our daily lives from so many perspectives, analysing it’s potential future performance, seems worthwhile.
The initial things I would take from this chart of AAPL in 2017, are :
- We have been in a bull market all year, staying well above the pink VWAP
- Whilst we started the year with high buying volume, in June there was some high volume selling. Most of the significant volume in the past two months has been on the sell side.
- Looking at the volume profile (y-axis), we are currently trading at the Volume Point of Control (VPOC) for 2017. This is the most popular trading price of the year, and hence means the stock is currently comfortable trading at or near this price. Usually a shift in fundamentals will be required to move it out of the sideways range.
- We have been in a sideways trading range around this VPOC since the beginning of June.
- The trading range is approximately $142.20 to $147.50
How to trade AAPL now
Looking at Apple stock in the short to medium term, the only real trade is within the range, which is currently $142.20 to $147.50 (in my opinion). Although 2017 has been bullish, there has been high volume selling in recent months, which makes it difficult to call a longer term play, until we have broken out of this current consolidation range.
So if I had to trade Apple now, I would be buying as we approach $142.20 (with stops below), with targets to close out as we approach $147.50.
Equally I would consider selling as we approach $147.50 (with stops above), and closing out the trade as we approach $142.20.
Because the longer term trend is bullish, I favour buying more than selling, but really there is not a significant call (for me) either way, whilst we’re in this range. So I consider the best risk/reward is just a range trade.
Is AAPL a good long term investment now ?
Considering Apple shares over the longer term, perhaps as a pension investment, generally implies buying the stock (as opposed to using derivatives to sell it/go short). Looking at a long term buy side trade, I would not be in favour of getting in any time soon.
The chart above shows Apple stock since 2009, and it’s an impressive sight. Certainly anyone that has had this stock in their pension since the credit crisis, will be very pleased with its performance.
However, for those getting in now, we have the issue of a stock that has performed very well, and is now at the very top of its performance and trading range. Is this a good time to buy ? I would suggest no !
As you can see from the above chart, I have drawn a basic channel represented by the blue dotted lines. Even with this most basic analysis, it can be seen Apple stock is at a high price, and historically at the top of a long term channel. There’s not a lot to suggest there is a huge amount of room to the upside, unless there is some new incredible technological breakthrough, which can push Apple into the stratosphere.
If I was to consider investing in Apple, it would not be until we approach the bottom of the channel at around $100. This is where the value is for me, and more opportunities for long term growth.