Will Apple rally into the end of the year?

Sometimes there is a lot to be said for just reading the tape. Back then, 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. Look at apple (NASDAQ: AAPL), the chart paints a pretty picture right now. After hitting a 52-week low back in June, stocks came close to reclaiming all-time highs in August before plunging back into the fall. But crucially, they didn’t come close to June’s lows, and even into this week they continue to surge higher.

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Visually and technically, it’s clear that Apple’s shares are setting higher lows. This is one of the most bullish patterns a stock can form and tells a lot about how eager the market is to get involved as each dip is swallowed up faster than the last. While we have yet to see higher highs confirm the bullish setup, things are looking good heading into the last few weeks of the year.

Supply chain concerns

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

That was a cautious view shared by the team at Morgan Stanley earlier this month, which also flagged the production headwind. Still, that didn’t stop them from maintaining their cautiously optimistic view of Apple stock. Analyst Erik Woodring’s overweight rating remains in place, while his $177 price target still points to an upside of around 20% from where the shares closed on Wednesday. Interestingly, this apparent contradiction in terms, which is flagging low inventory 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 Morgan Stanley’s and points to 30% upside in the near term.

Getting involved

So while the heavyweights are obviously flagging real and effective issues, it’s reassuring that they don’t see them as fundamentally negative updates that will hold Apple back so much. At the same time, reading the tape or looking at the chart confirms just as much. After trading mostly sideways for more than a year, it’s looking more and more likely that Apple stock is poised to make a decisive move. You have to think that if the last five months of red-hot inflationary pressures and rising interest rates weren’t enough to send them down to new lows, then bullish price action and dovish statements from the Fed could be enough to send them up to new highs .

If shares can get above $150, it will confirm much of this thesis. It will also mean that they put higher highs in conjunction with higher lows, which is the perfect combination needed for a rally. Even with new concerns about its supply chain raised starting this morning, this time from UBS, Apple shares are still up in pre-market trading. With the broader stock market starting to shift into risk-on mode following yesterday’s comments from the Fed’s Powell, this could be the perfect time to start buying into Apple’s phenomenal growth story again. They have weathered what could be the worst of the storm and have a strong track record of outperforming their peers when market conditions are favorable.

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