Why Apple Stock May Catch Bounce Into Q2 Earnings Print

Apple, Inc AAPL gapped down about 0.4% lower on Monday and fell an additional 1.63% after the market open, before finding buyers at the 200-day simple moving average and bouncing up from the low-of-day at the $158.50 mark.

The move lower is a continuation of a downtrend that Apple has been trading in since March 30, when the stock topped out at $179.61.

A downtrend occurs when a stock consistently makes a series of lower lows and lower highs on the chart. The lower lows indicate the bears are in control while the intermittent lower highs indicate consolidation periods.

Traders can use moving averages to help identify an uptrend with descending lower timeframe moving averages (such as the eight-day or 21-day exponential moving averages) indicating the stock is in a steep shorter-term downtrend and descending longer-term moving averages (such as the 200-day simple moving average) indicating a long-term downtrend.

A stock often signals when the lower low is in by printing a reversal candlestick such as a doji, bullish engulfing or hammer candlestick. Likewise, the lower high could be signaled when a doji, gravestone or dragonfly candlestick is printed. Moreover, the lower lows and lower highs often take place at resistance and support levels.

In a downtrend the "trend is your friend" until it’s not and in a downtrend, there are ways for both bullish and bearish traders to participate in the stock:

• Bearish traders who are already holding a position in a stock can feel confident the downtrend will continue unless the stock makes a higher high. Traders looking to take a position in a stock trading in a downtrend can usually find the safest entry on the lower high.
• Bullish traders can enter the trade on the lower low and exit on the lower high. These traders can also enter when the downtrend breaks and the stock makes a higher high indicating a reversal into an uptrend may be in the cards.

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The Apple Chart: Apple’s most recent lower high was printed on April 18 at $163.57 and the most recent high was printed at the $171.53 mark on April 21. The last high was slightly above the most recent confirmed lower high at the $171.27 level, which created a bearish double top pattern and caused the stock to fall further south.

• If Apple closes Monday’s trading session above $159.60, it will print a bullish hammer candlestick on the daily chart, which could indicate the next lower low is in and the stock will bounce up higher on Tuesday. If the stock closes the trading session below that level, it will print a second bearish kicker candlestick pattern when combined with Friday’s daily candle.
• Apple may also be trading within a falling channel on the daily chart, which is considered bearish until a stock breaks up from the upper descending trendline of the pattern. If Apple bounces up on Tuesday, it may find resistance at the trendline, which may give bearish traders a solid entry point.
• Apple has resistance above at $162.14 and $167.88 and support below at $157.46 and $153.92.

See Also: What This Apple Analyst Sees In iPhone 14 Lineup