Dow component Apple Inc. (AAPL) mounted $200 this week for the first time since Nov. 9 and pulled back, continuing an impressive recovery off January's 18-month low at $142. However, it will still take substantial buying power to reach October 2018's all-time peak, and that might not be in the cards at this time. As a result, less committed shareholders may wish to consider selling the stock and moving back to the sidelines.

The psychological $200 level could remain in play for months before Apple heads higher or turns tail and fills two large gaps generated by the recovery wave. This week's uptick also crossed the .618 Fibonacci retracement level, a common reversal zone, adding importance to price action in the coming weeks. Also keep in mind that the tech giant reports second quarter earnings in less than three weeks, and the rumor mill is likely to kick up into that event as it has in recent quarters.

Unfilled gaps at $158 and $175 increase downside risk as well, with the lower hole situated more than 20% under this morning's opening print near $198. In addition, three-month price action has carved two minor pullbacks that have failed establish strong support, adding another reason for a downturn that shakes out overly complacent shareholders while building a more constructive price pattern.

AAPL Long-Term Chart (1998 – 2019)

Long-term chart showing the share price performance of Apple Inc. (AAPL)

The stock fell to an 11-year low at a split-adjusted 46 cents in 1997 and turned higher, reaching a new high at $5.37 in March 2000. It turned sharply lower when the internet bubble burst, finding support under a buck in December. It tested that level after the Sept. 11 attacks in 2001 and again in April 2003, completing a long-term triple bottom reversal and entering an uptrend that reached the prior high in 2005.

A breakout gathered momentum into the December 2007 high at $29.00, giving way to a downturn that accelerated to a two-year low in January 2009. That marked a historic buying opportunity ahead of a recovery wave that stalled at the 2007 high at year end. A 2010 rally posted impressive gains into 2012, stalling near $130 and selling off to the 50-month exponential moving average (EMA) in 2013. Corrections in 2016 and 2018 found support at the moving average as well, raising the odds that the latest turnaround will eventually reach new highs.

The monthly stochastics oscillator crossed into a buy cycle in February 2019, predicting at least six to nine months of relative strength, and is now transiting the panel's mid-point. However, it will take just a small downdraft for the weekly oscillator to cross over at the overbought level, imposing eight to twelve weeks of relative weakness into the bullish mix. This conflict between time frames could easily short-circuit the rally and drop the stock into a trading range.

AAPL Short-Term Chart (2016 – 2018)

Short-term chart showing the share price performance of Apple Inc. (AAPL)

A Fibonacci grid stretched across the uptrend that started in 2016 places the January low at the .618 retracement level, highlighting this harmonic ratio's reputation for triggering reversals. That adds importance to the current uptick, which has reversed at the .618 retracement level of the 2018 sell-off. At a minimum, this symmetry warns shareholders that straight-up price action since January may be coming to an end.

The on-balance volume (OBV) accumulation-distribution indicator topped out at a new high ahead of price in September 2018 and entered a distribution phase that ended at a 17-month low in December. Buying pressure into April has matched price action, stalling at the .618 retracement level. This ratio repetition adds to overall symmetry, lending support to concerns about the rally's durability.

The Bottom Line

Apple stock has reached harmonic resistance and could pull back to shake out weak hands in the coming weeks.

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