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Today is judgment day for technically-minded investors in Apple Inc. The stock's chart stands at the crossroad between re-affirming the negative trend and breaking higher.
This chart – mapping Apple's stock price against the 50 day moving average – tells the story. In 2012 the stock remained well above its 50-day moving average which, according to technical analysis, is a sign of upside, or sustainable price momentum.
Price weakness began in the spring but the market's then-unshakeable faith in the company pushed the stock back above the 50-day in mid-June.
The rest of the summer showed the power of technical trend analysis in understanding short-term stock price movements. Twice, on June 21 and July 19, the stock tested the 50-day trend line and bounced hard to the upside until September. Then depression set in.
The trend line that had provided support – a technical floor for the stock price – became resistance. On November 26, January 16 and March 18, the stock tried and failed to breach the trend.
Recent strength in Apple stock now sees it trying again to get above the 50-day moving average. For technicians, if it is able to close above the line in the next few sessions they will become more convinced in a multi-week rally for the former market darling. But, if it bangs its head on the 50-day and moves lower, the technicians may throw in the towel for a while or even short the stock.
Whether you believe in technical analysis or not, it's clear from the chart that many investors do, and momentum indicators like the 50-day moving average are a powerful tool in understanding short term price movements.
Scott Barlow is a contributor to ROB Insight, the business commentary service available to Globe Unlimited subscribers. Click here to read more of his Insights, and follow Scott on Twitter at @SBarlow_ROB .
Scott Barlow