Dow component Apple Inc. (AAPL) reports earnings after Tuesday's closing bell, with analysts expecting earnings per share (EPS) of $2.10 on $53.29 billion in fiscal third quarter revenues. The big tech icon rallied nearly 5% after beating second quarter expectations and raising guidance on April 30, even though year-over-year revenues fell more than 5.0%. Market players had a change of heart after the initial uptick, dumping the stock more than 20% into June.

The subsequent bounce has failed to reach the May peak, while the weekly stochastics oscillator has crossed into a sell cycle. In addition, the reversal started at the .786 Fibonacci retracement level of 2018's fourth quarter decline, a harmonic level with a well-earned reputation for carving lower highs in trading ranges. Taken together, there are greater odds for a sell-off after this week's confessional than a rally opening the door to 2018's all-time high.

Wednesday's Federal Reserve decision adds a wrinkle to this mixed trade set-up because market tone may deteriorate quickly if doves don't get a 0.50 rate cut. A macro downdraft after the news could dump big tech, following a strong uptick that has lifted many components to all-time highs. Conversely, a retreating Fed could add to already substantial gains, overcoming Apple's short-term technical headwinds.

The fate of the tech giant will also be dictated by U.S.-China trade talks, which resume this week. The company's China sales have dropped precipitously in 2019, inducing Citi analysts to predict in May that the trade war will cut sales in half. JPMorgan and Credit Suisse followed suit with cautious June outlooks, but complacent investors have chosen to focus on the "Fed Put" rather than the mixed sales outlook into the new decade.

More ominously, China could play tit-for-tat if the United States doesn't drop criminal charges against Huawei's CFO Meng Wanzhou, who is also the daughter of founder Ren Zhengfei. President Trump has expressed a willingness to negotiate, but the issue is unlikely to be resolved without a broad-based trade deal, which few analysts expect to happen at this point with the presidential election just 15 months away.

AAPL Weekly Chart (2009 – 2019)

Weekly chart showing the share price performance of Apple Inc. (AAPL)

The stock bottomed out in the low teens after the 2008 economic collapse, entering a powerful uptrend that stalled near $100 in 2012. A pullback to the 200-week exponential moving average (EMA) found willing buyers, ahead of a 2013 uptick that reached the $130s in the first quarter of 2015. It sold off into the second quarter of 2016, finding support at the moving average once again, ahead of a 2017 breakout that posted historic gains into October 2018's all-time high at $233.47.

The fourth quarter swoon ended at a 17-month low in the $140s, giving way to a proportional bounce that failed at the .786 retracement level on May 1. It is now trading about five points under that peak, carving higher lows and lower highs typical in a developing triangle or diagonal trading range. Unfortunately for bulls, this pattern looks incomplete, favoring additional range-bound price action that could last into 2020.

Even so, fractal behavior might come to Apple's rescue in coming months. The stock ended corrections at the 50-month and 200-week EMAs in 2013 and 2016. This three-year interval is in play once again because the 2018 decline ended at the moving average in December. If the past is prologue, the stock will now rally into the prior high and break out, entering a fresh trend advance.

The Bottom Line

Technical headwinds favor a decline after this week's Apple earnings, but the stock is still well positioned to post new highs in coming years.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.