Apple Inc. (NASDAQ:AAPL) evokes the most chatter on the blogosphere by a wide margin. That’s no argument. How to trade the stock in the midst of a near-20% three month selloff? That’s up for debate.
As we’ve covered extensively over the past few weeks, it’s no secret that shares of the tech giant are cheap, so we’ll spare you the details. Here’s a full breakdown if you’re interested. While fundamentals-focused value investors probably find it hard to be bearish on the stock, technical analysts have been essentially the opposite. Though the arguments vary – depending on which school of thought a particular technician follows – the most common “sell” arguments are: (1) a weak MACD indicator, (2) characteristics of a tech bubble before the pop, (3) high volume on down days, and (4) the dreaded “death cross.”
That’s why we found it intriguing that one particular market technician on CNBC today was bullish on Apple Inc. (NASDAQ:AAPL). Here are the details.
On the network’s “Talking Numbers” segment earlier this afternoon, Richard Ross of Auerbach Grayson was discussing how he actually viewed Apple’s chart as a sign of positive things to come. Here are the highlights:
“Right now our charts are telling you: you want to hang in there, you want to be a buyer. When we look at that long-term weekly chart, we’re all familiar with the 25% pullback to key support at that well-defined three-year trend line. But what I love about this chart, is the failed “head and shoulders” […] when you don’t break below that neckline, that’s the key to the pattern. That neckline, key support around $530, that sets you up for a contrarian buy signal, a springboard to higher prices. Look for a re-test of the 200-day [MA] around $600, a test of that left shoulder around $640, and ultimately a re-test of that high back around $700.”
On the surface, it appears that Ross is focusing on what Apple Inc. (NASDAQ:AAPL) shares didn’t do: a “head and shoulders” pattern that signals the reversal of a long-term trend. Apple’s long-term trend is bullish, meaning that a H&S pattern would indicate shares were in bear market territory. Now, there are many technical indicators out there, but it’s widely acknowledged that the H&S is one of the most reliable, i.e. accuracy of 80-90% on average.
Even though many value-focused investors don’t use technical analysis on a day-to-day basis, Ross’s analysis is important nonetheless. After all, with a bevy of negative Apple Inc. (NASDAQ:AAPL) indicators being thrown out by chart-watchers, it’s extremely encouraging (for bulls) to see that the H&S pattern has not formed. Let us know your thoughts on AAPL in the comments section below, and if you’re buying the stock at the moment, or if you’re waiting on the sidelines.