Markets are under duress stemming from political uncertainty as the Donald Trump presidency comes under attack once again.
By Patrick Brik
This uncertainty is causing havoc on market indices, and even market darlings like Apple Inc. (NASDAQ:AAPL) stock are not immune. In uncertain times such as these, it is always wise to know where price support on AAPL stock can be found. Let us not forget that the current sell-off that has just gripped the market comes in the month of May. There is the old adage, “Sell in May and go away,” which is based on historical seasonal patterns that suggest that much of the gains in a calendar year are made in the first quarter, and seasonal weakness begins in the onset of spring and ends in the fall.
The method of analysis I employ to generate an investment view on Apple stock is suggesting that the bull market in AAPL stock is still alive and well. I have expressed my bullish views on Apple on more than one occasion, and those who have been following my publications should know I have had great success in calling the next directional move in this stock.
The following Apple stock chart illustrates the bullish trend that began after Donald Trump was announced the winner of the United States presidential election.
Chart courtesy of StockCharts.com
The accelerated run towards higher prices that began in November 2016 has been very uniform. This uniformity carries such precision that a simple uptrend line defines this entire bullish run. Just by gazing at the price chart, it is difficult to refute the significance of this pristine uptrend line.
An uptrend line is a simple yet effective tool that is used to define the predominant trend, and it could also be used to define risk. For instance, as long as Apple shares are trading above this uptrend line, I can only assume that the bullish trend that began in November 2016 is set to continue. If Apple should trade below this trend line, for any reason, I would have to assume that the bullish trend towards higher prices has concluded, and that lower prices are set to prevail. Setting a stop-loss below this trend line would be a simple and effective way to manage risk.
Political uncertainty with regards to Donald Trump could put a serious damper on this trend line if these accusation have some merit. Impeachment seems to be a popular term spun by many media outlets as they seem hellbent on such an outcome. It is not a mere coincidence that the rally began after a new president was elected, and it would surprise me if price broke below the uptrend line if these accusations against Donald Trump contained any merit.
For the time being, Apple shares are trading above the uptrend line, so the bullish trend and all its implications remain intact.
The following AAPL stock chart illustrates the bullish backdrop that was instrumental in creating this bullish uptrend.
Chart courtesy of StockCharts.com
This price chart has frequented many of my previous Apple publications because it contains an indicator that was essential in confirming my bullish bias on this investment.
This indicator is found in the lower panel and it is labeled MACD. MACD is an acronym for moving average convergence/divergence. This indicator is a trend-following momentum indicator that uses the crossing of signal lines to distinguish between bullish and bearish momentum. The direction of the cross determines whether bullish or bearish momentum is influencing the direction AAPL stock is trading in.
The MACD indicator has an impeccable track record of correctly confirming whether the Apple stock price is set to advance or decline. In 2009, 2014, and 2016, a bullish MACD cross was generated prior to a sustainable run in the stock price. The same can be said about a bearish cross that confirmed a correction in the stock price was set to take course.
These bullish and bearish indications have been generated as Apple has been oscillating inside a very large ascending channel. This ascending channel has effectively defined the entire bullish advance in this investment since the financial crisis concluded. As long as Apple stock continues to trade within this channel, the long-term secular bull market in this investment is set to continue. This channel is very well defined, making it a perfect candidate to swing trade this investment when the opportunity presents itself.
Bottom Line on Apple Stock
I continue to hold a bullish view on Apple stock despite the market turmoil. This bullish view is now contingent on AAPL stock remaining above an uptrend line that began its development in November 2016.