Apple Inc. (AAPL) Stock Is Bruised, But Is It Still a Buy?

Wait for the fat pitch at these two support zones for AAPL stock

By Tyler Craig, Tales of a Technician
Apple Inc. (AAPL) Stock Looks Cheap, but It Still Has Risks

Source: Shutterstock

Apple Inc. (NASDAQ:AAPL) fell nearly 2% Thursday amid a broad exodus from equities. The pain was as widespread as it was potent. And even AAPL stock, the king of securities, succumbed to the sellers’ wrath.

Beat the Bell: Apple Inc. (AAPL)Of course, panic-prone pundits have long forecast volatility’s awakening. The bulls’ fun was bound to be spoiled at some point, so why not now? August has an ornery history filled with volatile revolts.

Let’s reassess the technology sector with an eye toward AAPL stock. Just how should we respond to yesterday’s drubbing? Is the mighty fruit now destined to decay? Or is this a mere bruising and nothing more?

The BIG Picture

On a day like Thursday — when bears are roaming, and trading terminals appear a sea of red — it’s important to keep your wits about you. No need to make a mountain out of a molehill. If you’re an Apple trader curious on the level of damage inflicted, let the charts be your guide. Support breaks and trend reversals are warning signs worth watching. Consider these as noteworthy events warranting action.

Before diving to the daily, veteran traders take at least a glance at the weekly time frame for context and clarity. Here are the items that stand out to me.

AAPL stock chart weekly view
Click to Enlarge
Source: OptionsAnalytix

  • First, Apple stock remains entrenched in a weekly uptrend with buyers obviously in control. Sellers will need a lot more firepower than what was on display before the long-term trend looks even a whiff of bearish.
  • Second, the stock has rallied a modest amount over the past six weeks and could be due for a pause, if not a pullback. That suggests short-term caution is warranted.
  • Third, if Apple were to fall back below $156.60, that would invalidate the breakout, providing further reason for caution.
  • Fourth, a close in AAPL stock near its current level would create one the most bearish candles we’ve seen in nine weeks. Consider that another feather in the bears’ cap.

In sum, I see zero reasons to be a buyer of Apple here. Too many yellow lights are flashing — and that’s even before we grab a magnifying glass and zoom in.

What of the Daily?

For all the cause for short-term concern, it’s worth noting that AAPL stock is still one of the strongest in the entire market. The fact that it’s near record highs is impressive, trust me. Most other stocks have already fallen well into downtrends at this point.

AAPL stock chart daily view
Click to Enlarge
Source: OptionsAnalytix

The biggest development that concerns me on the daily is the slowing momentum. AAPL stock was able to eke out a higher pivot high on its last upswing, but barely.

The lack of zest created a bearish divergence in the Relative Strength Index (RSI) indicator. Though this signal isn’t always a harbinger of doom, it is disconcerting when combined with the other warning signs above.

If Apple continues to fall from its lofty tree, watch $155 and $150 as the next two support levels. A rebound off of either level (I prefer the $150) could be a buyable event.

Until then, I suggest you steer clear.

Don’t Look at AAPL Stock for Dough

While it may be unsatisfying to come to the end of an Apple-centric piece without an immediate trade idea, I’m doing it today to make a necessary point that every trader needs to learn, and be reminded of:

Remember profitable trading requires patience.

There will be a fatter pitch in the days ahead. In the meantime, if you’re itching for a short trade, might I suggest virtually any other tech stock on the planet. Both, Inc. (NASDAQ:AMZN) and Alphabet Inc (NASDAQ:GOOGL) look far more vulnerable here.

Or how about small-caps? The Russell 2000 looks far worse than Apple shares right now.

As of this writing, Tyler Craig held neutral RUT option positions. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.

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