It’s now been nine trading sessions ago since I last mused about the technical picture of Apple (NASDAQ:AAPL). On March 25, I said the stock looked to have enough juice left for another marginal move higher, while the $450 area would be my line in the sand to potentially consider the short side of the stock again.
A glance at the six-month chart — and hence the major downswing in Apple — reminds us of the initial breakout test past the downtrend that AAPL staged in early March. While for the quicker hitters among us there was a long-side trade to be had, the setup for those with intermediate time frames has so far been a scratch at best. As such, it is time to re-evaluate the charts and sniff at a new potential setup.
In mid-March, AAPL managed to sneak above its 50-day simple moving average (yellow line) for exactly two days before gravity kicked back in and pulled it lower. This simple moving average still holds as resistance until proven otherwise.
As of Thursday’s close, Apple was well on its way to retest the early March lows near $419, which given the downside velocity and steepness of the slope, now has a good chance of being pierced through quickly. In other words, AAPL is hanging by a thread here as the $425-$419 area serves as major intermediate-term support.
At this stage, it is handy to look at simple retracements to pinpoint potential downside targets for the stock should the March lows give in a hurry.
If we measure the swing from the late January highs down to the March lows, note that by late March, the move was retraced by 50% before finding resistance. A 25% extension of said move would get us a target well below the $400 mark, namely closer to $390, although better lateral support comes in at $380.