Apple and Microsoft: Which Stock Offers Greater Technical Potential?

Apple and Microsoft: Which Stock Offers Greater Technical Potential?

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Tech giants Apple (ticker: AAPL) and Microsoft (ticker: MSFT) both outperformed last year, adding 48.0% and 57.0%, respectively. Both are also part of the widely talked-about Magnificent Seven Stocks (includes Amazon [AMZN], Nvidia [NVDA], Meta Platforms [META], Tesla [TSLA] and Alphabet [GOOG]), which collectively rose nearly 80.0% in 2023, according to the Bloomberg Magnificent Seven Total Return Index. However, while Microsoft has continued to climb higher in 2024 (+13.0% year to date), Apple has struggled to find acceptance at higher levels (-12.0% year to date). 

According to an analysis of the weekly timeframes, the technical picture for Apple and Microsoft is interesting for the months ahead.

Trend?

Microsoft's shares are in a solid position in terms of trend. A basic analysis of the stock’s trend illustrates that the company’s share price is in a clear uptrend, forming an all-time high at $430.82 in recent trading. This is positive for buyers and could encourage investors to buy into this market. 

On the other hand, Apple’s shares show that while the stock formed an all-time high at $199.62 in late 2023, the technical environment suggests trouble could be ahead for the stock price. The weekly chart is in the process of forming a double-top pattern off all-time highs and is closing in on the pattern’s neckline at $165.67. A break here would be considered technical confirmation for bears to target lower levels, with a price target generally based on the difference between the highest peak and the neckline, which is then extended from the breakout point to form a profit target. 

Both stocks also remain above their 200-week simple moving averages. However, Apple is poised to converge and retest the upper edge of this dynamic value if the double-top pattern’s neckline is engulfed, with Microsoft diverging from the moving average. 

Momentum?

The price of Apple shows that the Relative Strength Index (RSI) suggests average losses are exceeding average gains after crossing below the 50.00 centreline. This tells us that the stock is in a phase of negative momentum and does not bode well for buyers, particularly as there is still room for the indicator to continue moving lower until the oversold area (0.00-30.00). 

Regarding Microsoft's stock, early negative divergence from the RSI is displayed around the overbought area (100.00-70.00). This indicates that while price action may have shaped higher highs in line with its current trend, momentum is slowing for now. Does this mean we will see a reversal here like Apple? No, not necessarily. While negative divergence should not be overlooked, this may be a false reversal signal or just a signal that the market is pausing for breath before pushing on to fresh all-time highs. Investors will want to see the RSI explore lower levels below the overbought area and maybe probe beneath the 50.00 centreline to confirm upside momentum is weakening for this stock. 

Given the above, there is some uncertainty with both stocks at the moment. 

Volume?

Volume studies for Apple’s stock remained consistent since early 2023, fluctuating around the 20-period average. For investors who focus on volume, there is not much to go on right now. What could excite investors, nevertheless, is a breakout above the average volume at a point when support enters the market or price breaks above resistance. One thing to bear in mind is that average periods of volume tend to be followed up with phases of increased volume and possible price breakouts.

It is clear for Microsoft that although price continues to make higher highs, volume is unsupportive. It is trading below average volume (20 periods). Investors who analyse volume are unlikely to be willing buyers at this point. An uptrend that lacks volume suggests that investors lack enthusiasm for the stock and that this is perhaps a weak rally we’re seeing. 

Price Action?

Sticking to basics, we can see that both Apple and Microsoft benefit from nearby potential trendline support. Apple, at its current price, has support in the $155.00 area. This consists of trendline support drawn from the low of $53.15 and another potential trendline resistance turned potential support drawn from the high of $182.94. 

However, for Microsoft's price, there is trendline support seen closer, taken from the low of $219.35. 

Out of the two markets, Apple’s trendline support combination is the more attractive in terms of technical confluence. 

Apple or Microsoft?

While opinions will differ on which stock has the greater potential, both appear worthy of attention. 

According to Apple's technical position, it has room to continue moving lower to the double-top pattern’s neckline at $165.67. This, coupled with Apple’s trend being meaningfully weakened and the RSI trading below the 50.00 centreline (negative momentum), may cause technical analysts to deem this a bearish market for the time being. What is likely to attract bullish eyes, nonetheless, is the trendline support combination around $155.00 and the nearby 200-week simple moving average. However, bear in mind that at this point, technical selling will also be present on the back of the double-top neckline breach.

Although Microsoft is showing early negative divergence from the RSI, it is unlikely to be sufficient to draw in sellers right now and could remain overbought for prolonged periods. Should Microsoft form a correction and volume continue to slow, investors could buy the dip from trendline support. Both stocks have declining volume, yet both have the potential to see above-average volume, particularly if buyers step in at trendline supports.