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The Magnificent 7 stocks are really beginning to differentiate themselves, from the “best of the best” uptrends like Nvidia Corp (NVDA) to charts like Tesla Inc. (TSLA), struggling to find a footing after gapping lower on earnings. I find that Apple Inc. (AAPL) has perhaps the most intriguing chart here, as 2024 has basically been a failed attempt to break to new 52-week highs. We’ll break down the chart of Apple along with another technology name, Microchip Technology Inc. (MCHP) , both of which have now tested and failed to eclipse key resistance levels. These failed breakouts suggest caution for these two stocks and may also imply a broader cause for concern in the fact that bullish patterns aren’t following through as expected. The cup-and-handle (also known as a cup-with-handle) pattern occurs when you have a rounded basing pattern after a rally phase. Both AAPL and MCHP made a new 52-week high in July 2023 and then spent the next five months retracing much of the gains from the previous rally. Then, in December 2023, both stocks retested their July peak, which formed the cup of this pattern. The handle was created by a short-term pullback in December into January, once again bringing the price back up to the rim of the cup. Now with any price pattern like a cup-and-handle, it’s all about the trigger. The trigger is that signal or level that confirms the pattern is legitimate, and investors often get into trouble when they “jump the gun” and try to anticipate a breakout that never occurs! For both AAPL and MCHP, unfortunately, that breakout never really occurred. Instead of AAPL pushing to a new high above $200, the stock is back retesting the lows of the handle around $180. MCHP stalled out right at the rim of the cup around $93 and has now pulled back to around $80. Watch Apple Microchip Technology has already broken down through the low of the handle around $82, which suggests further weakness with downside risk to the low of the cup around $70. Apple, for now, is holding support at the handle low around $180. If this level would fail to hold, then we’ll have one more Magnificent 7 stock in a confirmed bearish phase. What concerns me most about these patterns popping up is not just that it suggests caution for these two technology stocks, which I believe it does. It’s more of the broader implication that breakout patterns are not playing out for growth stocks. Bullish market phases are accentuated by leading stocks breaking out to new highs. Failed breakouts are much more common at the end of a bullish phase, where a lack of willing buyers causes breakouts to stall out. -David Keller https://www.marketmisbehavior.com DISCLOSURES: THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
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