Is The Stair-step Higher For Apple Over?

JC Parets
April 3, 2020

It's hard to have a conversation about the previous bull markets in the United States without including Apple $AAPL. It hit a Trillion Dollar market cap and actually doubled in value last year, believe it or not. This is the poster child for big strong US stocks.

Today, I want to talk about just how clean this stair-step pattern has been for the stock. It's inability to continue this bullish tradition could mean big trouble for US Stocks. However, holding on to last month's lows could mean the worst might be behind us for the overall stock market. My bet is on the former, more volatility, but the market doesn't care what I think. So let's try to figure it out together.

Here is a chart of Apple going back to the great financial crisis. As we always do, we take the high for the stock, pre-crash, and then measure it all the way to the low (You can learn more about this simple math here). One thing you'll notice is how Apple bottomed out in January of 2009, months before the S&P500 and Dow bottomed later on in March of that year. $AAPL was already showing its leadership qualities then. It's normal for leading stocks to show their true colors through relative strength prior to historic runs. In fact, that's what we're looking for in this cycle to signal who will be the leaders throughout the next recovery:

For this pattern of higher highs and higher lows to remain in place, $AAPL needs to hang on to last month's lows. If it does, I think that would be a positive sign for the stock market. This is a leader, no doubt. It's been able to do just that, hold above the prior high, during every single correction since the Financial Crisis. Is this time different?

This post is less about an $AAPL trade specifically, and more about the information that a stock like this can provide for us.

Here is the Relative Strength for Apple. If we start to take out 96 to the downside, I think that's a big problem, especially with that bearish momentum divergence starring at us in the face!

Do we collapse and fall towards 133, dragging the overall stock market much lower? Or was that it and now we retest the highs near 330?

Let me know what you think!

JC

 

 

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