As the summer days tick by, the bulls are slowly but surely trying to regain control of the stock market.
They will have a hard time doing so without Apple (AAPL) – Get Apple Inc. Report on board.
Apple is the largest company in the market, with a $2.35 trillion market cap. That’s roughly $350 billion larger than the next largest company, Microsoft (MSFT) – Get Microsoft Corporation Report.
For what it’s worth, we recently dissected both of these companies, concluding that they — along with Alphabet (GOOGL) – Get Alphabet Inc. Report (GOOG) – Get Alphabet Inc. Report — were in a league of their own.
Sometimes all you need is a bear market to separate the cream from the rest of the crop.
The S&P 500 is working on its fourth straight daily gain, and as it’s currently up 1.4% on the day, it appears poised to notch that victory. If it can do so, it will mark its first close above the 21-day moving average in a month.
Apple stock completed such a feat on Tuesday — but iti had previously closed above the 21-day as recently as June 27.
Now with Apple powering higher, the bulls are going to need the tech giant to continue its rally if they want the rest of the market to enjoy a sustained move up — even if it is just a bear-market rally.
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Trading Apple Stock
Daily chart of Apple stock.
Chart courtesy of TrendSpider.com
Last week, Apple stock rallied to the 61.8% retracement of the recent range and failed. That’s also when Apple last closed above the 21-day moving average, but it did so in sloppy fashion and dropped back below it a day later.
After four robust days, Apple stock has not only cleared last week’s high and the 21-day, but it’s now trading up into the 10-week and 50-day moving averages.
These are two very key measures that I think can determine the short-term direction for the stock.
Notice that both the 10-week and 50-day moving averages have been notable resistance over the past few months. If Apple can clear these measures, it creates more upside potential. If it’s rejected, that may indicate the market needs a rest, too, and/or will also struggle with these measures.
If Apple stock clears the 10-week and 50-day moving averages, it puts the $149 to $150 area in play. Not only was $150 the first-quarter low, it was resistance in the second quarter. Additionally, it’s where the 161.8% upside extension comes into play from the current rally.
This would be a really reasonable upside target should Apple continue to exhibit short-term momentum.
If Apple is instead rejected from the 10-week and 50-day moving averages, I want to see the 10-day and 21-day moving averages act as support.
A close below $138.50 does not bode well for the bulls in the short term, putting $133 in play, then the 2022 low near $129.
