Apple (NASDAQ:AAPL) bounced back from Monday's flash crash, closing out the trading week back in the triple digits. The spike seemed to defy the bearish warnings of market technicians, pointing to the ominous-sounding "death cross" as a sign that shares of the consumer electronics tastemaker were about to take a dive.
The argument seemed to defy logic. Apple stock has fared well during many of the death cross patterns over the years, as fellow Fool Evan Niu points out. Chart readers view the pattern -- caused essentially when a stock's 50-day simple moving average falls below the 200-day simple moving average -- as a sign of impending weakness, but it's not a fair way to assess a company that has historically moved on fundamentals.
This doesn't mean that technical analysis is for chumps. Knowing how to read a chart is a valuable skill with historical evidence pointing to its success. However, it's just one way to read the market. A whiff of good news can turn even the ugliest chart into a beauty pageant winner. Let's go over three things that could push Apple higher.
1. Circle Sept. 9 on the calendar
The next big Apple unveiling event is now slated for Sept. 9, and in less than two weeks it's widely expected that the class act of Cupertino will unveil the iPhone 6s and iPhone 6s Plus. Rumor sites are talking up a stronger aluminum body, Force Touch, and an improved processor and camera. We'll probably get some other announcements, and cyberspace is already speculating on a new set-top video box and updates to its iOS and Apple Watch software.
An Apple media event alone isn't going to push the stock higher. In fact, there is sometimes so much hype leading up to an announcement that the stock sells off on the news. However, with Apple shares hitting a fresh 52-week low on Monday and still trading 16% off its April highs after bouncing back by week's end it's not as if there's a lot of helium in the stock leading up to next month's announcements.
2. Apple Watch may not be a flop
Market sentiment has gone on a roller coaster ride since Apple's first foray into wearable computing this year. April's Apple Watch debut had investors initially giddy with strong initial sales numbers, but then reports indicated that demand had fallen off sharply after the first adopters snapped up the first production wave of wrist huggers.
Two recent events -- Best Buy (NYSE:BBY) announcing on Tuesday that it would be expanding coverage and a research report indicating stronger than expected sales -- suggest that now may not be such a bad time for Apple to be in the smartwatch space.
Best Buy's blowout quarter was a thing of beauty. Sales and earnings posted year-over-year gains, bucking Wall Street pros that were braced for declines. That's encouraging news consumer electronics in general, but Best Buy threw Apple a bone by announcing that all 1,050 of its stores would begin selling Apple Watch by the end of September.
Best Buy began selling the smartwatch through its website and at 100 of its stores earlier this month. The plan was to add another 200 stores later this year, but based on strong demand it's going for a full rollout.
The other nugget was market tracker IDC reporting that 3.6 million Apple Watch devices were shipped last quarter, higher than some had been estimating after the tech giant refused to divulge the number of smartwatches it cleared during the quarter. With Best Buy ramping up distribution it's hard to argue that this new niche is a flop.
3. Estimates keep inching higher
This isn't the same Apple that two years ago had Wall Street fretting about thinning margins as its key products peaked or went mainstream. Apple is succeeding with higher price points on its larger iPhones, and analysts keep pushing their profit forecasts higher.
Apple's low stock price and rising profit targets find Apple fetching a reasonable 12.4 times its expected earnings for the fiscal year that will end in four weeks and just 11.6 times next fiscal year's goal. Back out Apple's ample balance sheet greenery and the forward multiple drops into the single digits on an enterprise value basis.
Death cross or not, if Apple is getting cheaper and its profit prospects are improving it's a safe bet that the fundamentals will win out here.