Why Apple Shares Are Rebounding

Apple, Inc AAPL opened lower on Friday and quickly lost short-term support at Thursday’s low-of-day and fell to a support level near the $154 level.

The stock found buyers at that level and began to bounce up, trading about 1.5% higher at midday. If Apple closes the trading session flat or above the $156 level, the stock will print a higher low, which will confirm an uptrend is in the works

An uptrend occurs when a stock consistently makes a series of higher highs and higher lows on the chart. The higher highs indicate the bulls are in control while the intermittent higher lows indicate consolidation periods.

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

A stock often signals when the higher high is in by printing a reversal candlestick such as a doji, bearish engulfing or hanging man candlestick. Likewise, the higher low could be signaled when a doji, morning star or hammer candlestick is printed. Moreover, the higher highs and higher lows often take place at resistance and support levels.

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

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

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The Apple Chart: On Wednesday, Apple printed a higher high at the $166.48 level, which was above the most recent high printed at the $166.20 level on April 29. The higher high negated the downtrend but an uptrend can’t be confirmed until the stock prints a higher low, which may happen on Friday.

• If the uptrend is confirmed and Apple trades higher on Monday, bullish traders will want to see the stock regain support at the 200-day simple moving average (SMA), which acts as a bellwether to determine whether a security is in a bull or bear cycle.
• Bearish traders will want to see Apple reject the 200-day SMA on the next move up and form a reversal candlestick, such as a doji or shooting star candlestick, which could indicate lower prices will come.
• Apple has resistance above at $162.14 and $167.88 and support below at $157.26 and $153.92.

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