Apple Inc. (AAPL) is perched on a precipice. And with the tech titan teetering, all it’s going to take is a slight gust of selling to push it off the edge. It’s now or never bulls — you best defend your turf if you don’t want another outsized swoon in AAPL stock.
Let’s head to the charts to highlight Apple’s precarious position.
At $93.70 (Thursday’s close), AAPL stock is down 30% from its highs, deep into bear country. Apple fanboys are no doubt rejoicing at the stock sale, but who is to say the king of all iDevices may not descend 40% or 50% before the bear market is finally snuffed out?
Not surprisingly, AAPL stock is below all major moving averages. The 200-day, 50-day and 20-day moving averages are all descending confirming Apple’s downtrend on all time frames.
These oft-watched smoothing mechanisms will undoubtedly provide some hefty resistance on any kind of retest making a glorious ascension in AAPL stock all the more unlikely. If anything, it will be a bumpy ride riddled with many a setback.
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The latest descent has ushered Apple stock price right to the edge of a cliff. The $92.50 level is what turned the August crash, and here we find ourselves testing it yet again. So far support is holding, but the bulls should beware.
A long-term view of Apple’s chart reveals the next support level lies at $82, so the stock could be in for some serious downside following any kind of support breach.
A Bear Play If AAPL Stock Turns Rotten
It’s worth having a few bear trades waiting in the wings in case the Apple stock breakdown becomes a reality. To position yourself for max participation during the coming swoon, consider buying put spreads. We will use April options to give ourselves a couple months for AAPL stock to make the required move.
Buy the April $90/$85 put spread for $1.45. The max loss is limited to the initial debit and will be forfeited if Apple stock price is above $90 at April expiration.
The max gain is limited to the distance between strikes minus the net debit, or $3.55, and will be captured if Apple stock price can fall below $85 by expiration.
In timing the entry, wait to pull the trigger until AAPL breaks the $92.50 support level. If support holds, then all bets are off for the bears.
At the time of this writing Tyler Craig had no positions in any of the aforementioned securities.
