Apple Inc. (NASDAQ:AAPL) is trading higher on Friday. It has dropped about 12% since the beginning of June.
But the sell-off may be over. The shares are oversold and at support — and these can be bullish dynamics. This is why Apple is the Stock of the Day.
• What’s driving AAPL shares up today?
In February and again in April, Apple ran into resistance at the $275 level. People who sold there thought they made a smart decision when the price dropped afterward.
But when the resistance broke, and the shares headed higher, some of these previously happy sellers changed their minds. They thought the decision to sell was a mistake.
Some of them decided to buy their shares back, but would only do so if they could get them for the same price they were sold.
As a result of this, when Apple dropped back to $275, they placed buy orders, and these orders created support at the same price that had previously been resistance.
Apple is also oversold. The lower part of the chart is the Relative Strength Index (RSI). If the blue line goes below the lower red horizontal line, like it is now, it indicates oversold conditions.
These conditions could draw buyers into the market. They will be anticipating a reversal or move higher. Their buying could put upward pressure on the shares.
Stocks tend to rally after reaching support.
This happens when some of the investors and traders who created the support with their buy orders become anxious and impatient.
They know sellers will go to whoever is willing to pay the highest price. They don’t want to miss the trade, so they increase bid prices. Other anxious and impatient buyers see this and do the same.
It results in a bidding war or snowball effect that can push the price higher.
Being oversold while at support can be a bullish dynamic. Apple may be about to go into an uptrend.
Photo: Shutterstock
Login to comment