Shares of Dow component Apple Inc. (AAPL) sold off more than 3% in late December after Asian analysts cut iPhone X shipping estimates, citing weaker-than-expected holiday season demand. The news added to bearish sentiment following an admission that the Cupertino, California-based icon intentionally throttled older devices to lengthen battery life. The stock has recovered those losses in the past two weeks but failed to join other big tech heavyweights in the red-hot January rally.

If past is prologue, shareholders can ignore the shipment rumors while remaining optimistic about the market's reaction when the company reports earnings on Feb. 1. Long-time Apple-watchers know that these rumors are disseminated ahead of every quarterly report, planted by persons unknown in foreign venues, making the facts harder to verify. It could be different this time around, given the eye-popping price of the iPhone X, but it is best just to hang tough and let the company disseminate results three weeks from now.

It is even possible that recent volatility has lowered the odds for a bearish reaction to the February report because it has eased technically overbought readings generated by the fourth quarter's 20-point advance. More importantly, that buying wave completed a five-year channel breakout, while price action into January 2018 has tested and held new support. This predicts that the rally door is now wide open to $200 and beyond. (See also: Apple Poised to Gain 14%, Defying Skeptics.)

AAPL Long-Term Chart (1997 – 2018) 

 

The stock posted three higher highs between 1980 and 1991, topping out at a split-adjusted $2.62 and descending in a persistent decline that finally hit bottom at 46 cents in 1997. It then joined tech stocks in the internet bubble, rising more than tenfold into the March 2000 high at $5.37. The subsequent decline relinquished more than 80% of those gains, settling just under a buck in December. It tested support for more than two years, finally entering a new uptrend in the second quarter of 2003.

Buying pressure escalated during the mid-decade bull market, lifting the stock into its first leadership role in nearly two decades. The rally fizzled out in the upper $20s at the end of 2007, while the subsequent downturn accelerated during the 2008 economic collapse, dropping the stock to a two-year low at $11.17. That relatively strong performance set the stage for a rapid recovery into the new decade and a historic trend advance, driven by the smartphone revolution.

Price action between 2012 and 2017 carved a rising channel with support at the 50-month exponential moving average (EMA). A 2016 rally off channel support stalled at channel resistance in May and August 2017, while strong fiscal fourth quarter results triggered an October channel breakout, highlighting remarkable shareholder loyalty. The uptick established new support around $165, with declines into that level marking potential buying opportunities. (For more, see: A History of Apple Stock Increases.)

AAPL Short-Term Chart (2015 – 2018)

 

The stock reached channel resistance for the first time in two years in May 2017, yielding a smaller-scale channel that pressed against the barrier for five months before breaking out. The subsequent advance stalled above $175 in November, easing into a bullish consolidation that is holding new support. Meanwhile, on-balance volume (OBV) is waving a modest red flag, flashing a bearish divergence when it failed to join the price at new highs in February 2017.

New technical themes will emerge following a buying surge above $177 or a decline through $165 that triggers a failed channel breakout. That selling impulse would generate all sorts of bearish signals, exposing shareholders to additional downside that fills the February 2017 breakaway gap between $122 and $127. On the flip side, a breakout above $180 could mount $200 quickly, signaling another year of impressive gains. (See also: Apple to Gain on 'Super-Long' Cycle: Piper Jaffray.)

The Bottom Line

Apple stock has bounced back to range-bound highs following iPhone X shipment rumors and blowback in reaction to its slowdown of older products. The stalemate is likely to continue into the Feb. 1 earnings report, which could test resistance at $177 or support at $165. (For additional reading, check out: How Apple, Amazon, Nvidia May Push Techs to New Highs.)

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

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