Could Apple surge 10% on a breakout from resistance?

December 11, 2020 10:30

Technology stocks took a huge hit this week after the US sued Facebook for abuse of monopoly power and an announcement from the European Commission to fine technology companies up to 6% of global turnover on abuse of a company's market dominance.

While the FAANG stocks (Facebook, Apple, Amazon, Netflix and Google) have taken a hit, they are still the companies that are most interesting for investors. Any weakness could be bought, helping these stock prices to push higher.

Apple is poised for an interesting period as it is close to potential breakout territory, after forming an ascending triangle chart pattern formation, as shown below by the blue lines.

Source: Admiral Markets MetaTrader 5, AAPL, Daily - Data range: from Jul 30, 2020, to Dec 10, 2020, performed on Dec 10, 2020, at 5:30 pm GMT. Please note: Past performance is not a reliable indicator of future results.

Last five-year performance: 2019 = +86.61%, 2018 = -6.79%, 2017 = +46.11%, 2016 = +10.03%, 2015 = -4.64%.

The ascending triangle formation is formed of a horizontal resistance level at 125.28, with an ascending trend line support level both shown via the blue lines above. The pattern is a bullish formation where traders would typically employ reversion to the mean trading strategies to trade inside of the triangle pattern, or wait for a breakout into an uptrend.

With Apple products in demand over the holiday season, investors may have reason to be bullish about the company. A break above the technical horizontal resistance line at 125.28 could help the price move towards its all-time high price level at around 136 made in September. This represents roughly 10% upside.

According to BarChart, there has been a huge shift in bullish analyst ratings for Apple stock, as shown below:

Source: BarChart, December 10, 2020

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