While I use fundamental analysis for the majority of my thinking to determine whether to buy, sell or hold a stock I believe looking at and understanding chart patterns is another helpful tool. Looking at Apple’s chart I believe it shows that the company’s shares are poised to move higher after its earnings announcement. (Note that I own Apple shares).
One reason I believe in using chart analysis is that there are a lot of other people that rely on it. While it is never the only reason to own or trade a stock it is useful to consider about what other investors are thinking about a stock. It may be most helpful when deciding to execute a trade or not.
Apple’s shares have been “consolidating” for over a month
As you will see below Apple’s shares have been trading between $123 and $130 for over a month. This is after the stock moved higher after another consolidation phase before the company announced its December quarter results in late January when the stock had closed at $109.14 the day of the earnings announcement.
I have outlined in the chart below what looks like consolidation phases for Apple shares in four of its five recent earnings announcements. At the margin Apple’s latest stock price movement looks similar to the other four. The shares have also essentially found support at its 50 day moving average line during this consolidation phase.
Shares are a bit overbought from a very short-term perspective
Apple’s shares are up 18% since the beginning of the year and up 4% last week. The stock’s RSI (Relative Strength Index) or the upper third of the chart is at 61.7 which shows they are a bit overbought but that is due to last weeks run-up. The bottom third of the chart shows its MACD (Moving Average Convergence Divergence, another technical indicator) which is showing only a slightly overbought condition.
Analysts have been raising their earnings estimates recently
A number of Apple analysts have raised their iPhone and earnings estimates going into Monday’s announcement. I am above most if not all sell-side analyst projections with 65 million iPhones and EPS of $2.35 vs. their average of $2.16. I am expecting Apple to have a very strong quarter in China and channel fill to have a meaningful impact.
