Apple just launched the mother of all buying signals

While it was one of the first stocks to find a historic record last year, Apple Inc NASDAQ:AAPL has found itself lagging the broader market in recent weeks. The divergence is therefore rare and remarkable. Sure, Apple stock has its share of down days, but those usually happen in tandem with the rest of the market.

However, when Apple shares started to soften In the week before Christmas, the benchmark S&P 500 index was rising toward a record close. At the start of this week, the gap was quite pronounced. While the S&P 500 had managed to remain almost stable since December 18, Apple shares fell by almost 10%.

That being said, we do not expect this divergence to become permanent and, in fact, see a serious buying opportunity in the opening of Apple shares. This rarely happens, but when Apple’s relative strength index (RSI) hits 30 or lower, it is almost always followed by another rally. And the good news? Apple’s RSI marked 28 last Friday.

Oversold RSI

A stock’s RSI ranges from 0 to 100 and essentially tells you in a quick and easy way whether a stock is overbought or oversold. It usually takes into account the last 14 days of transaction history and generates a figure. A reading of 30 or less indicates that stocks are oversold and expected to rebound, while a reading above 70 suggests that they are heating up and could be due for a pullback.

Taking a look at Apple’s chart and its RSI, we can see how reliable it is as a buy indicator when it is at 30 or below. Prior to last Friday, the most recent decline occurred near the end of October, when Apple’s RSI hit 30. This was the lowest for the stock, and in six weeks, that is until In mid-December, Apple shares jumped 20%. Going back further, the RSI marked 27 in mid-August. This also marked a low and within a fortnight the shares were up 10%.

And to take another example, let’s look at the stock’s RSI as of December 2022. Apple shares were trading lower all month as part of a broader 30% decline that began the previous August. However, once the RSI fell below 30, the bears gave up and the bulls stepped in. The stock hit a new low the next day, then began a months-long rally that only recently regained momentum, gaining as much as 60%. waiting for.

Indeed, this signal has become so reliable that we are already seeing investors act on it. Yesterday, Apple shares jumped more than 2%, a rise that also took the RSI out of the danger zone. Although some concerns have been raised recently, such as to the valuation of Apple and continued growth prospects until 2024, it remains one of the Most Popular Stocks to Own over there.

Bullish outlook

MarketBeat MarketRank Forecast Tool The stock is rated as a Moderate Buy, and coupled with the fact that it has a high price target of $250, we’re inclined to think we may have just seen the lowest in Apple stock in the foreseeable future. Unless new doubts arise about the company’s ability to get through this antitrust headwinds forming in the distance, this is still a stock that is more likely to finish the year higher than where it started rather than lower.

Look for stocks to consolidate above the $180 mark, where the bears ran out of steam last week. While an RSI that screams oversold doesn’t exactly guarantee that a recovery rally is about to form, based on recent history with Apple, it’s a pretty safe bet.

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