Is Apple heading for $173? What to expect as the stock breaks higher from this pattern
Apple Inc. AAPL broke off a bullish flag on Wednesday, rising more than 2% and above the July 29 and August 1 daily high.
The bull flag pattern is created with a strong higher rise forming the pole, which is then followed by a consolidation pattern that pulls the stock lower back into a channel with parallel lines or into a squeeze triangle pattern.
For bearish traders, the “trend is your friend” (until it isn’t) and the stock may continue to fall into the next channel for a short time. Aggressive traders may decide to short the security at the upper trendline and exit the trade at the lower trendline.
- Bullish traders will want to watch a break of the upper falling trendline of the flag formation, on high volume, for entry. When a security breaks out of a bull flag pattern, the measured upward movement is equal to the length of the pole and should be added to the lowest price in the flag.
- A bullish flag is canceled when a stock closes on a trading day below the lower trendline of the flag pattern or if the flag falls more than 50% down the length of the pole.
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The Apple chart: Apple’s bull flag was formed between July 26 and Tuesday, with the pole created during the first four trading days of that period and the flag formed on Monday and Tuesday. The pattern break occurred on above average volume, indicating that the pattern was recognized, but the algorithms.
- The measured move from the break is 8.5%, suggesting that Apple could hit the $173 mark before breaking out. Apple created a series of bullish flags in its uptrend and each time moved closer to the target of the measured move.
- See also: Apple faces antitrust lawsuit from French developers over US App Store fees
- In Apple’s uptrend, the most recent low formed Tuesday at $159.63 and the last confirmed high was printed on July 29 and $163.63. Eventually, Apple will return to print its next higher low and traders and investors not already in a position can look for the action to print a bullish reversal candlestick, such as a doji or hammer candlestick, above the $160 level for possible entry indicate.
- A pullback is likely to occur within a day or two. Apple’s Relative Strength Index (RSI) sits at around 69%, which is in overbought territory. Apple’s two-day consolidation in the flag pattern was not enough to cool the RSI significantly, which may weaken the breakout of the pattern.
- Apple has upper resistance at $167.88 and $171.03, and lower support at $162.14 and $157.26.