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Technical Update - Apple could be forming top and reversal pattern
Kim Cramer Larsson
Technical Analyst, Saxo Bank
Summary: Apple Investors didn’t like the new products launch and the stock price has indication of an exhaustion of the strong uptrend. A larger correction could be in the cards. End of week closing is likely to be key
Yesterday Apple opened higher and was lifted in the early part of the session. Then sellers took control for most of the trading session and the stock closed lower.
I guess the market was not happy with the new product launch.
Right at the open today sellers are still in control and are likely to be in control for the next few days sending the stock price to test lower rising trendline in the channel Apple has been trading for the past couple of months. Over the same time period RSI has been showing divergence i.e., the RSI values have been dropping while the stock price has been rising. That is a sign of a weakening trend.
However, the trend is still up and a close below support at around 170.76 is needed for that scenario to change.
If Apple indeed closes below 170.76 a sell-off down to around 160.25 is in the cards.
Medium-term the spike up yesterday was the all-time high for Apple. There is no divergence on weekly RSI but if Apple closes this week below 176-96 it will have formed a Bearish Engulfing candle which is a top and reversal indicator.
If a Bearish Engulfing candle is formed a larger correction could be seen in Apple. Possibly down to the 0.382 retracement at 161.73
Around that level the 55 and 100 weekly Moving Averages currently rising are likely to add some support
If Apple takes out yesterday’s peak at 182.63 and closes higher a move towards $200 should be expected
If a Bearish Engulfing candle is formed a larger correction could be seen in Apple. Possibly down to the 0.382 retracement at 161.73
Around that level the 55 and 100 weekly Moving Averages currently rising are likely to add some support
If Apple takes out yesterday’s peak at 182.63 and closes higher a move towards $200 should be expected
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