Ever since mid-May, shares of Apple Inc. (NASDAQ:AAPL) have been struggling and it’s freaking out investors near and far. As a result, I have been bombarded by emails asking what I think about AAPL stock here and now. The below analysis is how I have been responding these emails and giving perspective on where it may make more sense to buy Apple again.
As a quick yet important side note, when AAPL stock (the world’s largest stock by market capitalization) falls then as a result of its weight, it on average also weighs on indices such as the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) and marginally even on the S&P 500 as represented by the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).
When I last mused about AAPL stock on June 12, I offered that the large-cap technology stock sell-off on June 9 that started all the spookiness was to be respected until proven innocent.
Although AAPL stock since then is only about 3% lower, it has been notably been absent of any bid. In fact, the entire QQQ ETF — and thus the largest of large-cap technology stocks as a group — have seen money rotating away from them into other parts of the market such as healthcare and financial stocks. I believe that without this type of perspective, over time it is just about impossible to consistently make money in the stock market.
AAPL Stock Charts
On the multiyear weekly chart, we see that it was likely no great coincidence for AAPL stock to stop its ascent in May, for it happened just as it reached the very upper end of its longer-term up-trending channel.
Plenty of chart-chasing traders make a habit of disrespecting such bigger picture charts, which most often leads them to trading losses and unnecessary distress. As such, from this bigger-picture perspective, while aggressive traders may even attempt to play the stock from the short side, my more specific message is that the current juncture in the bigger picture arguably remains a less than optimal spot to buy AAPL stock through the longer term.
On the more near-term picture, we see that the thus-far roughly 9% pullback in AAPL stock from its May highs has merely mean-reverted it back to a previous consolidation phase (blue box), which also roughly lines up with the previous intermediate-term up-trending channel (purple-dotted lines).
At the bottom of the chart, we see that although AAPL stock did not top out until mid-May, in relative terms it signaled weakness by the RSI indicator at the bottom of the chart since the February/March/April period.
AAPL stock is scheduled to report its next batch of earnings on July 25, which from today is a little more than two weeks away. As such, it is entirely possible that the stock will tread more water until then. Where the stock will bottom at this point is anyone’s guess, which is why I will first need to see a strong bullish reversal to buy it again in the near to intermediate term.
If the stock can get back above $148-$149-ish from current levels, then a squeeze back into the high $150s looks likely.
However, until a strong bullish reversal rears its head, it is entirely possible that the stock sees further weakness into the low $130s and thus toward its red 200-day moving average and the lower end of the up-trending channel (purple dotted parallels).
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