Chart Advisor: AAPL Blasting to New Highs

By Frank Cappelleri, CMT, CFA

1/ AAPL

2/ Bitcoin

3/ IWM Russell 2k ETF

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1/ AAPL

As everyone knows by now, AAPL has blasted back to new highs with one of its biggest two-day gains in history. In fact, the +10.3% two-day advance was the biggest since November’22 and the sixth two-day gain of at least 10% since the start of 2009. However, exceedingly strong two-day up-moves of this magnitude or greater have happened dozens of times in its history. In fact, there were 16 such instances between 1999 and 2000 alone.

So, what does this tell us about AAPL’s future direction? Well, for one, we know that this kind of move can’t be sustained. That’s hardly soothing for investors who feel that they missed a huge advance.

Let’s think about it this way instead: AAPL has shown it can (and will) rally from various technical states throughout its history. The last few months are a perfect example of this.

Does anyone recall what happened on March 7, 2024? There wasn’t much news that day for the stock, but AAPL declined for the seventh straight session. That was a long losing streak, but it was just part of a very trying start of the year. For that reason, AAPL didn’t receive the type of attention it has been used to over the years… Instead, NVDA and anything AI-related were the focus. This remains the case… In fact, on March 7th, 2024, relative to the S&P 500, AAPL hit its most oversold state EVER. In particular, the 14-day RSI of the AAPL/SPX ratio (AAPL vs. the SPX) plummeted to 12. In hindsight, we know that was a great buying opportunity, but was it that much better than any point in its history?

Let’s dig a little deeper. As this long-term chart shows, AAPL has followed the same pattern for decades: Break out to new highs, consolidate for long periods of time and break out again. From this perspective, the last two days simply created the latest multi-year breakout. Past performance is no guarantee of future success, but if AAPL follows the same path as it has for years, then this push to new highs won’t be the end of its strong run.

2/ Bitcoin

Bitcoin’s stall near 70,000 level so far in 2024 has frustrated traders who were expecting a major breakout this past March. But even Bitcoin can’t continue to spike with a 14-day RSI near 90, which is where the indicator shot up to at its most overbought state. However, by catching its breath over the last three months, BTC now has formed multiple bullish patterns.

Here are the first two: The green formation is a cup & handle pattern; the one in blue is an inverse Head & Shoulders pattern. The upside objectives would be 78,000 and 86,400, respectively. These are measured move targets, and they are attained simply by adding the height of each pattern to the breakout points. As of right now, BTC has not completely leveraged either of these. T. That makes the near-term price action critical, as additional weakness in the near-term could negate them both.

The much larger inverse cup & handle pattern has a bigger cushion. As is clear, the last three months of consolidation have constructed this potential right shoulder. We’d need a convincing breakout to new highs for this to become live. And that means we’d need to see the reviewed smaller formations continue to work first. What if the smaller patterns fail? Traders simply will have to wait for more to form.

3/ IWM Russell 2k ETF

Needless to say, Small Caps continue to lag. It’s not that the IWM R2k ETF has been plummeting. In fact, it is +25% from the October’23 low, a little more than seven months ago. In in a vacuum, that would be considered a very healthy move in a relatively short span of time. But, investing often is a relative game. And with the SPX +32% and the NDX +38% over that same time frame – and many large cap tech names up a lot more – IWM still is playing catch-up.

We’ve seen this before. In fact, since the 2009 low, IWM has gone through three prior multi-year periods, all which included a big decline, an equally big comeback and then a breakout to new highs. All three breakouts led to strong moves for various months to come. From that point of view, the current comeback attempt looks a lot like those past iterations. It’s just taking longer this time. If/when IWM does finally return to its 2021 highs then, it very well could break out and see a similar extension. But should we actually care? As the lower panel of this chart depicts, during the snapback phases since 2009, IWM did, in fact outperform the SPX. But that relative strength faded just as IWM broke out from an absolute basis. If this behavior is replicated again soon, then buying the IWM up to the 240 level makes sense, however, sticking with it after that may not – at least relative to the S&P 500.

About This Week’s Author

Frank Cappelleri, CMT, CFA has been an active member of the CMT Association for over 20 years and received his CMT Charter in 2004.  Frank had various roles during his 25-year Wall Street career, including equity sales trader, technical analyst, research sales specialist and desk strategist.

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Originally posted on June 13th, 2024