After rallying 34% in 2021, Apple (AAPL) has had a much tougher year in 2022.
Despite strong quarter earnings results, Apple’s long-term trend rolled over and started heading lower in February.
Its June low represented a near 30% fall from the start of 2022. And it saw hundreds of billions wiped off Apple’s market value.
As the biggest stock on the market, Apple’s fall played a major role in sending the broader market lower. Not to mention the hundreds of ETFs of which it’s a member.
Now, after rallying off those June lows, anxious investors are watching to see if Apple can drag the market back higher.
Today, I’m going to see what’s in store for this $2.3 trillion behemoth and see how we might trade it.
Because despite massive volatility, this year we traded Apple in both directions (here and here) for tidy gains, using my options trading service, The Opportunistic Trader.
Let’s check out AAPL’s chart…
Apple (AAPL)
Source: eSignal
After a strong rally into the end of 2021, Apple shares turned lower in 2022. From the start of January, Apple was caught up in the major selloff.
Despite rallying strongly in March – a move that almost eroded its yearly losses – Apple soon reversed and sharply headed lower.
Since its March 30 peak, it’s been one-way traffic all the way down.
This peak in March coincided with the Relative Strength Index (RSI) forming an inverse ‘V’ near overbought territory (upper grey dashed line).
Then, as the RSI headed down through support and into the lower half of its range (below the green line), Apple shares followed it lower.
The 10-day moving average (MA – redline) confirmed this downtrend by crossing down over the 50-day MA (blue line).
Since the MAs crossed over, the RSI has remained entirely in the bottom half of its range (a bearish signal).
Right now, I’m watching the RSI pattern to see what direction Apple will take. So, what can we expect from here?
Well, since the RSI broke into the lower half of its range, you’ll notice some clear patterns.
Take another look at the chart…
Apple (AAPL)
Source: eSignal
Each time the RSI formed a ‘V’ near oversold territory (lower grey dashed line) and traded higher, we saw Apple bounce.
And when the RSI ran into resistance and failed to break higher at the red circles ‘1’ and ‘2,’ Apple peaked at ‘A’ and ‘B.’
Then, as the RSI subsequently rebounded lower, Apple also fell.
As you can see, the RSI is pressing up against resistance again at the red circle marked ‘3.’
If the RSI fails to break through and instead rebounds lower like at ‘1’ and ‘2’ – this will lock in another lower high that will become ‘C.’
And this would set up the opportunity for a potential short trade.
However, if the RSI instead breaks into the upper half of its range, that’ll give this current move more momentum.
And this would set up Apple for a rally and a potential long trade.
After that, the next test for Apple is to take out its high at ‘B.’
On July 28, Apple is scheduled to release its next earnings results. Until then, we can expect to see a lot more volatility.
But if we stick to our indicators and only enter trades based on strong technical setups, then that’ll provide us with opportunities for more profitable trades ahead.
Regards,
Larry Benedict
Editor, Trading With Larry Benedict
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