Apple Isn't a Fave Now, but It Will Be Again

 | Jun 16, 2017 | 6:00 AM EDT
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I wrote about the Sentiment Cycle Thursday as I believe it relates to the beloved FANG stocks. By the time midday rolled around and it was clear these stocks were not breaking down, it was almost a race to see who could pick the bottom in them faster.

I'd like to take you back to the spring of 2016 when Apple (AAPL) was trading around $90 to $95. The headlines were all about how Apple had had its first revenue decline in 13 years. The chatter on Apple? It was as if folks were arguing over who could hate it more. Price targets of $75 and under were everywhere. They were surely not fussing over whether $90 was the buy of a lifetime. (Apple is part of TheStreet's Action Alerts PLUS portfolio.) 

I have written a lot about Apple this week, but that's because it really has slipped from being the biggest fan fave out there and it has a more defined chart. Glance back at the spring of 2016 and please note how long the stock spent trading back and forth between $90 and $110 to $115. One full year. Yes, that is a full year.

If you missed it the first time at $90 in early 2016, it gave you a second chance in April of that year. If you missed it in April, you got you a third chance in June. Now let's do some math. The typical way to measure a target is to take the high of the pattern and subtract the low. In this case, we'll use $115-$120 as the high and $90 as the low. That gives us $25-$30 as the difference. We then add that to the breakout.

Let's call the breakout $115-$120, and as you can see that takes us to the $145-$150 area for Apple. Notice a few things. Once the stock got to $140 it took a breather by going sideways for two months. Then it had that last run to $155, but here it is back in that $140 area.

My rule when it comes to measured targets is it's an area the stock typically corrects from. Perhaps it goes sideways and digests for a few months or perhaps it has an actual correction. I never know which will occur but it is unusual for it keep surging.

Here's what I do know: In the past, when Apple has made a really good low, one that has gone on to surge ever upward as we saw in 2017, it has done so from a base. I do not see a base on this chart. If I squint very hard, I see the same chart I saw a few days ago: one with resistance in that $150 area. In the very near term, sure, Apple did not make a lower low on Thursday vs. Monday, but I do not see a base. I see a stock that held $142 and has resistance at $150.

It is my view that there will be another time when Apple sets up well for more than a trading rally. And it will likely come when we hear folks arguing for lower prices, not because they are afraid of missing the low.

For more market analysis from Helene Meisler, sign up for Top Stocks, published five times a week.

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