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Shares of Apple Inc. (NASDAQ:AAPL) dropped along with the broader market on Tuesday, but managed to hold on to a key near-term area of technical support. Further broad-market weakness could easily and quickly lead AAPL stock to snap this support area and fall to a next support level that currently resides about 5%-6% lower.
Apple watchers everywhere are focused on the Sept. 12 event where the company is widely expected to unveil a new iPhone, among other announcements. While AAPL stock could go any which way following this announcement, preparation is key, for every battle is won before it is ever fought.
So you know, AAPL stock last week reached fresh all-time highs and now is higher by just about 40% for the year. While I would not dare to make a longer-term bearish bet on Apple, in the near- to intermediate-term, things continue to look very stretched.
Large-cap technology stocks as represented by the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ:QQQ) continue acting well, but since June they have significantly lost in upside momentum.
AAPL Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart, we see that much of the rally in AAPL stock in recent months has come on lower momentum. This is displayed with a lower high (so far) by the MACD momentum oscillator at the bottom of the chart, while the stock price itself has continued to ascend.
While this type of “negative divergence” alone is no reason to freak out and sell stock holdings, it is something worth respecting for the time being.
Moving averages legend: yellow – 21 day
Moving on to the daily chart, we see that AAPL stock has shown lots of respect for its yellow 21-day simple moving average this summer. Note how the stock bounced right off this moving average in July, in August and once again yesterday. All of this started as the stock pushed back above this moving average with a vengeance in early July.
Given this price action over the past few months, it is difficult to imagine that if and when AAPL stock were to break below this moving average, it would be completely ignored and the stock would just bounce back higher. In my eye, the most likely course of action should the stock close below the 21-day simple moving average (currently around the $160 mark) is that a next leg lower toward the low-to-mid $150s gets underway.
The $154 area would then serve as a next downside target, possibly followed by the $150 area, which would also fill the post-earnings up gap from early August.
Check out Anthony Mirhaydari’s Daily Market Outlook for Sept. 6.
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