Trading in Apple Inc. (NASDAQ:AAPL) is quiet Friday. The price has hardly moved. But there is a chance the stock may soon break out and head higher.
A classic Ascending Triangle Pattern formed on the chart and this pattern tends to be bullish. Our expert team of technical analysts has made Apple our Stock of the Day.
Technical analysis has a dubious reputation. It is easy to understand why. Many analysts try to identify patterns on charts without considering or understanding the price action they illustrate.
If understood and applied correctly, technical analysis is the study of supply and demand and the investment psychology that drives the markets. Savvy traders use this knowledge to profit.
An Ascending Triangle Pattern can form because of two dynamics. Buyers are aggressive and sellers are passive.
As you can see on the chart, levels around $236.50 first became resistance in July. There was also resistance in late October. Now the stock has found resistance again.
This means the large group of traders and investors who created the resistance with their sell orders have been patient. They have been willing to wait and let the buyers come to them.
They feel no need to push the price lower.
But over the same time frame, the buyers had become impatient and aggressive. They were willing to pay higher prices.
Markets don't go in straight lines. They form peaks and valleys while they are trending. When a valley is higher than the one that proceeded it, traders say that it is a “higher low.”
This illustrates important price action.
It shows that as time has gone by, buyers were willing to enter the market at higher prices. They became increasingly aggressive. This combination of patient or complacent sellers and aggressive buyers could set the stage for Apple to break the resistance.
If this happens, it could illustrate another important market dynamic. It would mean the investors and traders who created the resistance have finished or canceled their orders.
With them out of the way, buyers may be forced to pay successively higher prices to attract sellers. This could force Apple into an uptrend.
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