How far will Google, Apple fall?
Upcoming earnings reports from Google and Apple could help the struggling shares reverse course. A look at the charts for both stocks reveals the key levels to watch.
- The daily chart shows a potential head-and-shoulders (H&S) top formation with key support at the neckline (line a) currently at $551. There is additional support and the weekly uptrend now in the $518 area
- More important chart support is in the $500-$508 area and a break of the neckline would project a drop to the $460 area
- The relative performance, or RS analysis, peaked in October 2010 and formed much lower highs in early 2011. More importantly, the RS broke below support on February 22 (line b) when GOOG closed at $610.21
- This established a pattern of lower highs and lower lows in the RS, line c. This increases the probability that GOOG will also break key support
- The volume pattern does support the H&S top formation analysis, as volume was highest in October and has declined since. The daily on-balance volume (OBV) has broken below support (line d) going back to late November and also shows lower highs and lower lows
- As noted previously, the weekly OBV (not shown) did not make new highs early this year and the negative divergence has weakened the intermediate-term outlook
- There is initial resistance for GOOG at $585 and a close above $598 would clearly improve the technical outlook. More important resistance now stands at $610-$620
- AAPL is now reaching next chart support (line a) in the $326 area. If this level is broken, the 38.2% retracement support, as calculated from the August 2010 lows, is at $315.80
- The rising 200-day moving average (MA) is at $306 with the more important 50% support at $300. The weekly uptrend (not shown) is at $293
- The daily OBV has turned up from support at line b and needs to move back above its weighted moving average (WMA) to turn positive. The weekly OBV (not shown) did confirm the recent highs
- Very short-term resistance is at $341.10 and the 20-day exponential moving average (EMA), and a close above this level would be a short-term positive
- There is further resistance at $351.60 and then at $354.50. If these levels are overcome on a closing basis, it should signal that the correction is over
- If this year’s trading range is resolved to the upside, the first projection targets are in the $377 area
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Stocks are facing some serious resistance as the bears tear into the market's respite.
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