Apple earning will be announced after the close and the price is trading smartly higher +$1.85. The Nasdaq is also on fire, rising by +47.

Does the market know something?

I wish I knew. However, I know there are plenty of analyst who have the fundamental picture all mapped out, and perhaps there are some funds who needed a little more AAPL in the portfolio before the announcement (hence the sharp run up). Assuming no one really knows the actual numbers, there will be a reaction and technical levels will be breached either above or below.

Apple is more neutral heading into earnings

Apple is more neutral heading into earnings

So what are the technical charts saying?

With the wash-out, and bounce back from last week, the technical charts are a “bit muddy” at the moment. Traders are looking for the inspiration from the earnings and the subsequent market reaction. Although there is some ambiguity, it helps to define the risk and will provide a more definitive bias AFTER the results. That is a good thing for traders.

So what are the good (bullish) and the bad (bearish) technical clues to focus on?

First lets look at the bullish technical signals.

  1. The price is above the 100 day MA (Blue line in the chart above). That level comes in at 96.918. Last week, the price went below this moving average for the first time since April 4, 2014, but rebounded with the better tone on Thursday and Friday. Those who sold on Wednesday, have been forced to buy since then.
  2. The price is just above the broken trend line at the 99.13 level . On Friday the price came to the underside of the broken trend line and fell off. Today, the price moved above- trading at a high price of 99.69 so far.
  3. The low on the correction corresponded with a 8.25% correction from the high. The low did not approach the 38.2% retracement of the move up from the last time the price was below the 100 day MA in April 2014.
  4. The stock is up from 80.14 year end price. That represents a 24% gain for the year. Not a bad run considering the Nasdaq is up 3.04%.

Now the bearish technical signals:

  1. Lower highs. There are lower highs with the high for the year coming back on September 2nd,
  2. October lower than September. The low from October was lower than the low from September. This was the first time this has happened since April.
  3. Below 50 day MA The price is below the 50 day MA (orange MA line) at 99.93.
  4. Below 2012 high price. The price is below the 2012 high price at the 100.724 level.
  5. Below topside trend line. The price is below the topside trend line connecting the September and October highs (at 102.00)
  6. The stock may be overbought. The stock is up 24% in a market that is up only 3.04% for the year. Is AAPL too high relative to the market?

What will the movements after the results tell us?

If the price is able to extend back above the 50 day MA at the 99.93 level and stay above, that would help turn the bias more bullish. The next targets will then be the high price from 2012 at the 100.724 and topside trend line at the 102.00 level currently. A move above that will open the door for a test of the all time high at 103.74 and then the trend line connecting the high from 2012 to the 2014 high. That level is around the 104 level. Any move above that and traders will be focused on staying above the broken levels left in the wake of the surge higher.

On a move lower, the initial level to get back below would be the 99.13 trend line. A more important level to get and stay below would be the 100 day MA at the 96.918 and the lower trend line at the 94.82. If things start to get more ugly, the 38.2% at the will be eyed.

The earnings will be eyed closely. The market is setting up for some good. Let’s see what happens.