Dow component Apple Inc. (AAPL) has rallied more than 55 points since posting a six-month low at $213 on March 23, but it isn't wise to expect the stock to hit new highs in the second quarter because the decline triggered an aggressive run for the exits that eliminated more than a year's worth of new shareholders. This volume deficit will take months or years to overcome, telling market players to proceed with extreme caution.

The stock has done a good job recovering into April, lifting back above the broken 200-day exponential moving average (EMA) after a four-week violation. The reopening of some Apple stores in China has underpinned optimism during this period, inducing a small supply of sidelined players to open or reopen long positions. However, company sales in Europe and the United Sates could be pressured for months, with closed stores and unemployment lines reducing the appetite for expensive new iPhones.

Long-term development is also taking a hit, with at-home employees focusing on day-to-day business activities rather than building a laundry list of expensive new products. The shutdowns are also affecting supply chains and third-party software developers, setting the stage for a tough period that is unlikely to end in the second quarter. Even so, Apple is Apple, suggesting that folks will resume old buying habits when stability returns to the world sales environment.

AAPL Long-Term Chart (1990 – 2020)

Chart showing the share price performance of Apple Inc. (AAPL)
TradingView.com

The stock acted poorly through most of the 1990s, with the iOS operating system losing popularity and market share to the Windows juggernaut. It turned higher from a 12-year low in 1998, joining the internet bubble in a solid advance that stalled at a split-adjusted $5.37 in the first quarter of 2000. Aggressive sellers took control into 2003, dumping price to a five-year low that marked a historic buying opportunity.

The subsequent bounce hit new highs in 2005, setting off a powerful uptrend that stalled at $29 at the start of 2008. The stock showed resilience compared to other tech issues during the economic collapse, holding at a two-year low, and took off for higher ground at the turn of the decade. The initial rally wave ended at $100 in 2012, giving way to a correction that found support at the 50-month EMA in 2013.

Intermediate corrections into 2016 and 2019 ended at the 50-month EMA as well, carving a line of defense that could come into play in the coming months. The last rally wave posted an all-time high at $327.85 in January 2020, giving way to a small-scale double top breakdown, followed by the steepest decline since the fourth quarter of 2018. Even so, price action has held well above the December 2018 low, allowing the stock to retain its strong technical outlook.

AAPL Short-Term Outlook

The monthly stochastic oscillator entered a sell cycle from the most extreme overbought reading in the stock's public history in February 2020, significantly raising the odds for at least six to nine months of relative weakness. The indicator is now stretching through the panel's midpoint, indicating that bears control the long-term tape, despite short-term price action. This bilateral structure sets the stage for a reversal that could test and potentially break the March low.

The 50-month EMA rising from $180 has now aligned with the .786 Fibonacci retracement level of the 2018 into 2020 uptrend, providing a logical downside target if March support breaks. Keep in mind that a descent into that support zone would also trigger a failed breakout above the October 2018 high at $228, making it harder for a bounce to reestablish an uptrend that can challenge the all-time high.

The Bottom Line

Apple stock has bounced strongly off the March low, but underlying technicals indicate that bears remain in control of long-term price action.

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