Investors in the high-flying technology sector finally got a wake-up call and found that their beloved stocks, including Apple Inc. (NASDAQ:AAPL), can actually have really bad days. But now it appears that Apple stock is on sale.
Whether it was shaky news from around the globe, rotation into more value-friendly sectors or just ‘fraidy cats in the trading “pits,” Big Tech was smacked Monday.
However, out of distress comes opportunity.
Of course, the company announced new iPhone and Watch models but that news was not out when Apple stock started to sag. Indeed, the stock peaked on Sept. 1, the last trading day before the long Labor Day holiday.
The market looked rather good, too, with headlines such as:
- Nasdaq Composite logs best weekly gain of 2017
- U.S. stock market closes higher after jobs report, bevy of data
- Nasdaq books 46th record of 2017
Nothing not to like there. Yet Apple stock started to fall the next trading day and kept going until this week.
Click to Enlarge The formal announcement of the new iPhone 8, 8s and X models plus the new Apple Watch Series 3 happened Sept. 12.
The stock initially jumped and then closed in the red for the day as some balked at the price tag for the X model. Others complained that it still did not beat its Android smartphone competition. And probably more significant, sales were not going to book until the next fiscal year.
A few days later, the company admitted that there are connectivity issues with the new Watch. Shares fell again.
Sentiment for Apple and its cousin tech stocks started to sour. Headlines such as, “Apple stock suffers worst product launch week of the iPhone era,” are subjective proof that investors and analysts were quite unsettled.
That’s where contrarians can shine. When “everyone” thinks something is bearish it is often a good time to be bullish. Why? Because theoretically others have already sold and selling pressures ease.
We see that on the charts when stocks open and close at about the same price for a given trading day. And for wonkier chart readers, we can see it intraday as technical momentum indicators start to climb, even as price continues to fall.
Click to Enlarge Let’s look at that big technical picture. The entire market started to rally early in 2016 and Apple was no exception. For reasons that don’t matter much, the bull market trendline starts in June of last year. However, for reasons that matter a whole lot, that trendline is still intact today.
So is the widely followed 200-day moving average. In other words, Apple stock is still in a bullish trend. The recent price swoon was merely a healthy correction in an ongoing rally.
Financial services firm Raymond James Financial agrees and upgraded the stock.
Apple stock’s drop was not exactly “blood in the streets,” but it was enough to get people talking about the demise of one of the best innovators on the planet.
It may not be quite as hot as it used to be but it is still a money-making machine.
As of this writing, Neil Martin did not hold a position in any of the aforementioned securities.
