Trading Nation

Apple chart has me bullish for three reasons, says technician

After hitting a new high, Apple is consolidating. Here’s which direction it will break

Apple has been trading sideways since hitting record highs earlier this month. Oppenheimer technician Ari Wald sees three reasons why the next move for the tech leader will be up.

First, Apple has managed to break through several key resistance levels, Wald told CNBC's "Trading Nation" on Tuesday.

"The stock's breakout above March resistance, it broke higher both on an absolute and relative basis," said Wald. "The market hasn't been able to do this. In a difficult market tape, Apple's breaking higher. That's a sign of relative strength."

Apple shares have traded above a mid-March high since early May. Its stock is currently 2 percent above that March 13 high.

Its relative strength index, a measure of momentum, has leveled off since hitting a year-to-date peak nearly three weeks ago. Its RSI of 61.7 is below the 70 level typically indicative of overbought conditions.

Since hitting an intraday record on May 10, Apple shares have held within a tight trading pattern between $185 and $191.

"Talking about that more recent consolidation, it's just really moving sideways after that big move," said Wald. "It's allowing overbought excesses to get cleared through time. Typically these corrections should ultimately resolve to the upside. It's called a bullish pennant pattern, argues for an upside breakout."

"Top-down" tail winds that have given the entire technology sector a lift should also continue to help Apple shares, said Wald. "Macro trends support growth investing," he said.

"When you add it all up we rate Apple buy, we think it breaks higher, we like it," he added.

Larry McDonald, editor of the Bear Traps Report, does not share in Wald's bullish view. He said sector rotation looks likely to hit names like Apple.

"From a late-cycle perspective the consumer discretionary names like Apple are in a very, very tough, tough spot," McDonald said on Tuesday's "Trading Nation." "We're starting to see early signs of a transition back to staples away from discretionary and that rotation can be spectacular so we want to be overweight XLP, underweight XLY and underweight companies like Apple."

The XLP consumer staples ETF is down 12 percent for the year to date, the XLY consumer discretionary ETF has added 7 percent and Apple is up 10 percent. The tech giant's shares were slightly lower Wednesday, trading at around $187 a share.