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Apple post earnings hangover - risk of corrective decline

U.S. technology giant bellwether, Apple has posted stellar fiscal Q4 earnings numbers that beat expectations. In addition, Apple has given a rosy guidance on potential stronger sales for its wearables; Air Pods and services for the upcoming holiday season. The share price of Apple has rallied by 3% in after-hours trading that saw a spike to 252.50 (above its current all-time high printed on 249.76 printed on 29 Oct) before it drifted down lower to settle at 248.19.

My colleague, Ken Odeluga has written an earning preview report on Apple earlier (click here for a recap).

Right now, we will decipher share price movement of Apple from a technical analysis perspective.

Medium-term technical outlook of Apple (AAPL)

click to enlarge charts

Key Levels (1 to 3 weeks)

Pivot (key resistance): 255.10

Supports: 232.10/230.00 & 215.30

Next resistance: 270.20/271.60

Directional Bias (1 to 3 weeks)

Bearish bias below 255.10 key medium-term pivotal resistance for a potential mean reversion/corrective decline to target the 232.10/230.00 support zone.

On the other hand, a clearance with a daily close above 255.10 sees an extension of the impulsive upleg towards the next resistance at 270.20/271.60 (Fibonacci expansion cluster)

Key elements

  • Since its major low of 142.00 printed on 03 Jan 2019, AAPL has staged a steep rally of 76% to print a current all-time high of 249.76 printed on Tues, 29 Oct (normal U.S. session).
  • Current price action is now coming close to a significant resistance zone of 252.50/255.10 which is defined by an intersection point of the upper boundary of a primary ascending channel from May 2016 low, upper boundary of a major ascending channel from 03 Jan 2019 and upper boundary of a medium-term ascending channel from 03 Jun 2019 low. The 252.50/255.10 resistance zone also confluences with a Fibonacci projection cluster.
  • Elliot Wave/fractal analysis suggests that the AAPL is still evolving within an intermediate degree impulsive wave 3/ sequence, in place since 03 Jun 2019 low of 170.27. Right now, it is likely that it has or coming close to complete the minor degree bullish impulsive wave 3 in place since 05 Aug 2019 low of 192.58 within the longer-term wave 3/ sequence. Thus, AAPL is now at a potential minor reversal point where it may shape a multi-week corrective wave 4/ sequence before another impulsive upleg materialises.
  • Momentum indicators are also advocating a potential mean reversion decline. The weekly RSI oscillator has reached its overbought region while the daily MACD Histogram has shaped a bearish divergence signal (a similar occurrence seen on 22 Mar-01 May 2019) which has led to a price decline of -20%. These observations suggest that medium-term upside momentum has started to wane.  

Charts are from eSignal


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