Apple Inc.: When You Should Start Shorting AAPL Stock

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Apple Inc. (NASDAQ:AAPL) shares fell more than 10% last week after a disappointing earnings report and word from activist investor Carl Icahn that he sold his shares in the company scared investors. As a result, AAPL stock fell to a major multiyear technical line of support, and a break below said line could lead to more downside.

Beat the BellAll last week, the financial media debated whether AAPL stock has seen its best days. The way I see it, Apple might have seen the best of its upside trajectory for the coming years, but it doesn’t mean the stock can’t climb higher over time — it likely will, just at a slower pace.

Apple’s arm extends too deep into the smartphone and related ecosystems, and aside from new product launches, the company still has plenty more areas to capitalize more on — particularly in the services segment.

From an investor flow perspective, I have for about a year heard of large institutional investors reducing their positions in AAPL stock; last week’s confession by Carl Icahn merely confirms this trend. However, what’s more concerning at this juncture is that the majority of the analyst community still has buy ratings on the stock, and that the retail community is also uber-bullish on the stock.

All that could help Apple falter further in the near-term.

AAPL Stock Charts

Looking at the multiyear weekly chart, we see that AAPL stock has been holding above its 200-week moving average for years, but now for the first time, shares are visibly weighing on this line in a more serious manner.

Note that for the past 12 months, Apple has been making a series of lower highs, and the horizontal support area marked by the red dotted line is now getting tested a third time since last August. A break and hold below the $90 area through this lens likely targets the low $80s.

AAPL stock chart weekly
Click to Enlarge

On the daily chart, we see that the most recent lower high (the reaction high from mid-April) coincided with the stock’s red 200-day simple moving average as well as the 61.8% Fibonacci retracement of the move from the November 2015 reaction highs down to the February lows.

AAPL stock chart daily
Click to Enlarge

Although AAPL stock might be oversold in the immediate-term, active investors and traders could look to re-short the stock or buy put option spreads on any oversold bounces, using a first downside target in the mid-$80s for the next few weeks or even months.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/05/apple-inc-aapl-stock-short/.

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