Apple Consolidates As The Stock Market Readies For A Big Move In One Direction: The Bull, Bear Case

Apple, Inc AAPL was trading slightly higher on Tuesday in continued consolidation after trading mostly sideways on Monday. The consolidation comes in tandem with the S&P 500, which has been consolidating within a triangle pattern as the market ETF approaches the apex.

The two-day horizontal pattern has caused the Cupertino, California-based tech giant to settle into a double inside bar pattern on the daily chart. An inside bar pattern indicates a period of consolidation and is usually followed by a continuation move in the direction of the current trend.

An inside bar pattern has more validity on larger time frames (four-hour chart or larger). The pattern has a minimum of two candlesticks and consists of a mother bar (the first candlestick in the pattern) followed by one or more subsequent candles. The subsequent candle(s) must be completely inside the range of the mother bar and each is called an "inside bar."

A double, or triple inside bar can be more powerful than a single inside bar. After the break of an inside bar pattern, traders want to watch for high volume for confirmation the pattern was recognized.

Once the market finishes consolidating, a larger move in one direction is likely to come, which could increase volatility. Traders wishing to trade any volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index, track expected volatility in the SPDR S&P 500 SPY over the next 30 days.

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The Apple Chart: Apple has been trading under a key resistance level near $174 since May 5, which is a similar trading pattern to the S&P 500. Apple’s consolidation, within a double inside bar pattern, leans bullish because the stock has been trading in a fairly consistent longer-term uptrend since Jan. 6.

• Traders and investors can watch for Apple to eventually break up or down from Friday’s mother bar on higher-than-average volume to indicate future direction. If the stock breaks bullishly from the pattern, a return toward Apple’s Jan. 4, 2022 all-time high of $182.94 could be in the cards.
• If Apple breaks bearishly from the pattern, the stock could find support at the 21-day exponential moving average, which has been guiding Apple higher since March 13. If the stock falls under $164, the uptrend will be broken and a longer-term downtrend could be on the horizon.
• Apple has resistance above at $174.33 and $177.71 and support below at $171.03 and $167.88.

Next: Apple Worth More Than The Entire Russell 2000, Will The Trend Continue?

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