Is Apple Going To Rally Into Year End?

Key Points

• Bad headlines haven’t been able to take shares down.
• The technical setup is looking more and more bullish.
• Macro conditions favor an uptrend.

Sometimes there’s a lot to be said for just reading the tape. Back in the day, investors didn’t have access to breaking news, or even old news like we do today, but they still made money by looking at a stock’s chart and forming an educated opinion. Looking at Apple (NASDAQ: AAPL), its chart paints a pretty picture right now. Having slammed into a 52-week low back in June, shares came close to retaking all-time highs in August before dipping again into the fall. But crucially, they came nowhere near June’s low and even into this week continue to move up higher. 

Visually and technically speaking, it’s clear that Apple’s stock is setting higher lows. This is one of the most bullish patterns a stock can form and tells a lot about how keen the market is to get involved when each dip is gobbled up quicker than the one before. While we’ve yet to see higher highs confirm the bullish setup, things look good heading into the last few weeks of the year. 

Supply Chain Worries

This positive trading action will do much to dispel any negative effect of recent headlines around Apple, because unfortunately for the bulls, there’s been quite a few. Last week saw Wedbush highlight what they called “major” iPhone shortages across Apple stores on Black Friday, which they flagged as a knock-on effect of the ongoing COVID-driven disruptions in China. Dan Ives and his team noted that iPhone 14 Pro shortages had gotten “worse” and that inventories were likely running critically low. China’s zero COVID policy, which is causing mass unrest in the country currently, has been the bane of many tech companies this past year, especially those with key manufacturing operations based there.

It was a cautious outlook shared by the team at Morgan Stanley earlier in the month, who also flagged the manufacturing headwinds. Still, it didn’t stop them from maintaining their cautiously optimistic outlook on Apple stock. Analyst Erik Woodring’s Overweight rating is still in place, while his $177 price target still points to an upside of some 20% from where shares closed on Wednesday. Interestingly, this apparent contradiction in terms, that is flagging low inventories while recommending a buy, was shared by Wedbush when they reiterated their Outperform rating with last week’s comments. Dan Ives’ $200 price target goes even further than that of Morgan Stanley and points to 30% upside in the near term. 

Getting Involved

So while the heavyweights are obviously flagging real and effective problems, it’s reassuring that they don’t see them as fundamentally negative updates that will hold Apple back all that much. In tandem, reading the tape or looking at the chart confirms just as much. Having traded mostly sideways for more than a year, it’s looking more and more likely that Apple shares are keen to make a decisive move. You have to be thinking that if the past five months' worth of red-hot inflation prints and rising interest rates weren’t enough to send them down to fresh lows, then bullish price action and dovish statements from the Fed just might be enough to start them trending up to fresh highs.

If shares can get above the $150s it would confirm much of this thesis. It would also mean they’re setting higher highs in conjunction with higher lows which is the perfect combination needed for a rally. Even with fresh concerns about their supply chain being raised as of this morning, this time from UBS, Apple shares are still up in pre-market trading. With the broader equity market starting to switch to risk-on mode after last night’s comments from the Fed’s Powell, this could be the perfect time to start buying into Apple’s phenomenal growth story once again. They’ve managed to weather what might be the worst of the storm, and have a strong track record of outperforming their peers when market conditions are favorable.