You Ask, We Analyze: Why Apple Stock May Remain Volatile Heading Into Fed Meeting, Monthly Opex

On Monday evening, Benzinga asked its followers on Twitter what they’re buying at the open on Friday. From the replies Benzinga selected one ticker for technical analysis.

@NGluckin, and @_TradeWolf_ are buying Apple, Inc. AAPL.

On Tuesday, Deutsche Bank analyst Sidney Ho reiterated its Buy rating and upped Apple’s price target from $175 to $200. This implies a possible 15.6% move to the upside for the blue-chip stock.

Apple’s stock price can be pulled down by the general markets, however, and on Tuesday morning the SPDR S&P 500 was trading almost 1% lower in the premarket. Inflation fears combined with impending rate hikes to combat rising costs have spooked the market recently and with the Federal Reserve’s monthly meeting scheduled to take place next week, combined with the monthly options expiry (opex) taking place Jan. 21 traders and investors have become wary.

Investors may be waiting on the sidelines until the Fed gives a clearer statement on whether it intends to follow through with its first post-COVID-19 rate hike in March, which Fed Chairman Jerome Powell has implied will happen during his last two monthly press conferences.

As for Apple’s stock, the indecision on direction has become clear as it has traded mostly sideways between about $167 and the Jan. 4 all-time high of $182.94 since Dec. 7.

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The Apple Chart: When Apple printed its new all-time high the stock didn’t receive follow through over its Jan. 3 high of $182.88. The combined price action over those two days created a bearish double top pattern near the level and subsequently, Apple fell more than 6% over the eight trading days that have followed.

The sideways action that Apple has been trading in may have formed the stock into a bearish head-and-shoulders pattern with the left shoulder created between Dec. 7 and Dec. 20, the head formed between Dec. 21 and Jan. 10 and the right shoulder being printed over the days that have followed. If the stock reacts to the pattern the measured move is about 8%, which implies Apple could retrace toward the $155 level.

Traders can watch for Apple to break down through the neckline of the pattern on higher-than-average volume to gauge whether the head-and-shoulders pattern was recognized. On Friday, Apple’s volume was lower-than-average, however, which indicates the stock may continue in a sideways pattern for further consolidation.

Apple is trading below the eight-day and 21-day exponential moving averages (EMAs) but the eight-day EMA is trending slightly above the 21-day, which indicates indecision. If the stock continues to trade below the two moving averages on Tuesday, the eight-day EMA will cross below the 21-day, which would be bearish.

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• Bulls want to see Apple continue to hold above the neckline of the potential head-and-shoulders pattern, which will negate it and then for big bullish volume to come in and push the stock back up over the eight-day EMA. There is resistance above at $174.33 and $177.71.
• Bears want to see big bearish volume come in and drop Apple through the neckline and then for momentum to push the stock down below the 50-day simple moving average, which will indicate longer-term sentiment has turned bearish. The stock has support below at $171.03 and $167.88.