Apple has reached support-reversal territory. What is it and why is it important? | chart of art

Technology stocks have been hit by selling pressure early in the year, but many stocks are still in longer-term trends and some are approaching support reversal territory. In particular, Apple (AAPL) has entered the support reversal zone and is predicting a rebound. Let’s investigate.

First, the long-term trend is upward, as APPL broke out of a falling wedge in early October and hit a 52-week high in mid-December. The stock has fallen from its highs and is currently trading in a support zone. A classic principle of technical analysis is that broken resistance turns into support. Wedge line and October high resistance. Strengthening demand (buying pressure) creates a breakout and the breakout area becomes future support due to residual demand (blue shading).

Chartists can use retracements to identify potential reversal areas. The current decline is a reversal of 50-61.8% of the previous rise (late October to mid-December). Charles Dow suggests that a countertrend move typically retraces 1-2/3 of the previous move, with 50% representing the base case. Think of this as two steps forward and one step back. APPL is in a retracement zone that could lead to a short-term reversal.

Apple is also oversold in the short term, increasing the possibility of a rebound. The indicator window displays the Momentum Composite, part of the TIP Indicator Edge plugin for StockCharts ACP. This indicator aggregates the signals of five momentum oscillators and reached -5. This means that all five indicators are oversold. When it reaches -3 or lower (blue line), it is considered oversold.

Apple is oversold and trading in the support reversal zone. All we need now is a near-term upside catalyst. Chartists can use intraday charts or candlesticks to measure short-term reversal times. You can also use indicators to measure the amount of momentum in motion. This section continues for TrendInvestorPro members.

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