At least from a technical analysis perspective, Apple’s stock is poised to laugh in the face of President Donald Trump’s raging trade war with China.
Apple’s (AAPL) stock has formed what traders call a “golden cross” chart pattern. The formation — typically a bullish signal —happens when a short-term moving average crosses over a longer term moving average.
One could see that formation below for Apple, compliments of Miller Tabak strategist Matt Maley. It’s interesting that the stock has made this pattern considering the fundamental risk to Apple’s business model from the now heightened U.S.-China trade war.
Maley notes that Apple’s stock has acted very well after its last three golden cross patterns. Actually, the gains that have ensued border on insane — Maley’s research shows gains of 530%, 110% and 130% (see prior rallies below), respectively, over the past decade.
“If things calm down [on the trade front] (which might be a BIG "if"), the upside could be quite bright for this Apple,” Maley says.
Maley isn’t all in on Apple, however. While the stock may be poised to rally, it’s not without greater than normal risk for the tech giant.
“Given the fundamental issues surrounding the stock, investors should keep tight stops on any new long position in Apple, but if history is any guide, it could rally quite a bit from current levels,” Maley adds.
Caution on global behemoth Apple makes sense. Apple not only sources a majority of its components from China, but has made a retail store push in the country. The yawning trade war between the two mega countries could severely raise Apple’s cost of doing business and weaken store traffic and in turn, hit profits.
“The trade war has already undercut U.S. and global growth. Prolonged brinkmanship creates further damage. A major tail risk is that tariffs extend to all Chinese products at the end of June, more than doubling the trade war shock,” cautions BAML strategists.
“I don’t envy Apple’s chief operating officer right now,” remarked Weeden & Co. Chief Global Strategist Michael Purves on Yahoo Finance’s The First Trade.
Brian Sozzi is an editor-at-large and co-host of ‘The First Trade’ at Yahoo Finance. Follow Brian Sozzi him on Twitter @BrianSozzi
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