Apple Breaks Key Level and Surges Higher

In Q2 2024, Apple experienced a mixed financial landscape, balancing challenges and achievements. Despite a year-over-year decline in quarterly revenue, the Services segment achieved record growth, emphasizing its crucial role in Apple’s overall business resilience. This article presents a technical analysis of Apple stock and continues the discussion from the previous article to determine the next direction of the stock price. It was found that the stock price broke the $200 mark and continued to advance higher.

Recap

In the previous analysis, the Q2 2024 earnings were discussed. Apple showed mixed financial performance and experienced challenges. However, the Services segment displayed exceptional growth, highlighting its crucial role in Apple’s overall business resilience. The net income decreased in Q2, but the long-term trend remains positive, emphasizing Apple’s ongoing potential for profitability and investor confidence.

Apple’s continuous innovation is evident with the introduction of Apple Vision Pro and other product developments. The historical data and technical indicators suggest that Apple stock is poised for further growth throughout 2024, supported by solid financial performance and commitment to cutting-edge products.

The technical outlook for Apple’s stock remains bullish, with the emergence of a bull flag pattern that indicates potential future price surges. The breakout at $165 served as a strong buy signal. The historical retracements to key Fibonacci levels followed by a strong rally confirm the upward trend. Considering fundamental and technical factors, Apple’s stock is expected to maintain a bullish trajectory, making it an appealing option for long-term investors aiming for higher returns in 2024.

Apple Leads with Continuous Innovation and Enhanced Privacy

Apple continues to lead the tech world with its constant stream of new ideas. The latest feature of Apple Intelligence combines smart models with personal context for iPhone, iPad, and Mac users. This feature, found in iOS 18, iPadOS 18, and macOS Sequoia, uses Apple’s powerful chips to understand and create language and images, manage tasks across apps, and make daily life easier. Apple’s Private Cloud Compute sets a new privacy standard by balancing processing on devices and servers with Apple silicon.

This innovation can potentially impact Apple technology, bringing more innovations. Apple is also focused on privacy and security. Private Cloud Compute enhances iPhone’s top-notch protections by extending them to the cloud without sacrificing privacy. New features like locked and hidden apps and better protection in Mail and Messages keep user data safe. These updates have increased investor confidence, showing Apple’s commitment to user trust and data security—critical factors in the competitive tech market. By addressing privacy and security, Apple strengthens its market standing, attracting customers and investors.

Additionally, Apple introduced visionOS 2 and macOS Sequoia. VisionOS 2, a major update to Apple Vision Pro, brings features like creating spatial photos, easy hand gestures, and better Mac Virtual Display capabilities, enhancing user experience. macOS Sequoia includes smart features like iPhone Mirroring, big updates to Safari, and new gaming improvements. These updates show Apple’s dedication to improving its products. The new features have grabbed investor attention and boosted confidence in Apple’s growth and leadership in the tech industry.

The technology industry is rapidly evolving, and other competitors are also introducing new products. The chart below shows the PE ratio of Apple, Microsoft, Amazon and Google. Apple’s PE ratio of 33 suggests it offers good value with solid growth expectations, though not as high as Amazon’s. Apple’s PE ratio is in the middle range, indicating balanced growth potential and risk compared to Google and Microsoft. This makes Apple a reasonable investment choice, offering a good mix of growth and value.

The Next Move in Apple

Based on expectations from last week’s analysis, the stock price surged higher, broke the resistance above $200, and initiated a strong rally. It is interesting to note that the stock price is now showing a solid candle for June, although there are still two weeks remaining for the month to close the candle at higher levels. If Apple closes the monthly candle above $200, it will be considered a breakout, and the market will likely trade higher. Notably, this breakout came after strong consolidation within a bull flag, followed by a breakout and retest of the bull flag, further strengthening the outlook. This break above record highs is likely to initiate a strong surge.

The weekly chart for Apple also shows a decisive breakout above the blue trend line, which might act as the neckline of a double bottom. Additionally, the expansion of the blue and red lines marks a symmetrical broadening pattern, and the breakout above $200 has broken this pattern, indicating that prices have initiated a strong surge in the market. Returning to the breakout level might be considered a strong buying opportunity to invest in Apple.

The daily chart also shows a positive outlook. Last week’s breakout above the neckline initiated a strong surge over two days, resulting in a price increase of over 14%. Although this rally is likely to continue higher, it also highlights the intense volatility in the market.

Market Risks

Despite Apple’s strong performance and growth potential, several risks could impact its future. One significant risk is the increasing competition in the technology sector, particularly from companies like Samsung, Google, and Amazon, which continuously innovate and expand their product offerings. This heightened competition could pressure Apple’s market share and profit margins. Additionally, the rapid pace of technological change means that Apple must consistently invest in research and development to stay ahead, which could strain its resources if new products fail to meet consumer expectations or achieve commercial success.

Economic factors also present significant risks to Apple. Global economic downturns or recessions could reduce consumer spending on premium products like Apple’s, impacting sales and revenue. Moreover, supply chain disruptions, whether due to geopolitical tensions, natural disasters, or pandemics, could hinder Apple’s ability to produce and deliver its products efficiently. Given its substantial international revenue streams, fluctuations in foreign exchange rates could also affect Apple’s earnings. From a technical perspective, the stock price breakout above $200 happened quickly, and prices must remain above $200 to maintain an upward trend. A break below $200 will indicate a deeper correction.

Bottom Line

Despite the challenges highlighted in the Q2 2024 earnings report, Apple’s continued innovation, particularly with the launch of Apple Vision Pro and new software updates, positions it favourably for future growth. The fundamental growth triggered the technical breakout in the stock price, and prices are on their way to trade higher in 2024.

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