Shares of Apple Inc. (NASDAQ:AAPL) fell on Tuesday on the back of a note by Credit Suisse that said supply chain checks of Apple are indicating that iPhone sales have weakened as of late. Apple stock was quick to react negatively right at the open, and the weak trading continued all day.
As a result, AAPL stock also sustained some technical damage and could now see further weakness in coming weeks (barring any quick bullish reversal).
Before going into more detail on my analysis, let me reiterate that I’m not bearish on AAPL and its prospects through a longer-term lens. I think Apple will continue to have its ability to innovate and make and market user-friendly, useful and stylish products … it’s in Apple’s DNA.
That said, in the equally big picture, I do think the biggest rally days are gone as AAPL stock simply cannot continue to grow exponentially at this size.
The good news is that for active investors, this should provide ample opportunity.
AAPL Stock Charts
Getting right to the bigger picture, we see that on the long-term weekly logarithmic chart, AAPL stock despite the good rally off the late-August lows remains below the blue support line from the 2009 lows. For longer-term charts, I sometimes prefer to use a logarithmic chart as opposed to a regular algorithmic chart as the logarithmic variety more heavily weighs the more recent data points.
While AAPL stock trading below this long-term trendline is not a massive negative, it is something worth respecting. The red 70-week moving average, which has been a good reference line for years, has been marginally overcome over the past few weeks, but with Tuesday’s drop is being tested yet again.
All in all, from this chart, AAPL stock is in neutral territory at best.
Moving on to the daily chart, we see that AAPL stock last week rejected (i.e., found resistance at) its red 200-day simple moving average, which still coincides with the long-term blue former support line from the above chart. After a few days of consolidating just below the 200-day, Apple stock on Tuesday gapped lower right at the open and never looked back, closing the day down more than 3% on an uptick in volume.
Since the August lows, AAPL stock has also carved out what technical analysts would refer to as a rising wedge pattern, which is bearish in nature. In the case of AAPL stock, shares last week reached their upper end right at the key 200-day moving average. From here, the stock looks heavier again and an initial drop toward the $110 area could work out for active investors.
As such, active investors could look to play AAPL stock to the downside either via the options market or directly shorting the stock. Any quick bullish reversal of Tuesday’s drop should be respected and close the bearish near-term bets.
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Successful trading and investing starts with a plan. Download Serge’s essential trading plan, The Essence of Swing Trading e-book. As of this writing, he did not hold a position in any of the aforementioned securities.
