Trade of the Day: Watch These Downside Price Targets for Apple Inc.

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aapl stock - Trade of the Day: Watch These Downside Price Targets for Apple Inc.

Source: iphonedigital via Flickr

Shares of Apple Inc. (NASDAQ:AAPL) fell about another 1.4% on Thursday among further weakness in the broader stock market. While I still believe in the longer-term growth picture of the company, the weekly charts are pointing to lower prices, which sets up a short-side swing trade for active investors and traders to take advantage of.

Through the lens of market structure (i.e market internals strength or weakness), it is important to note that February’s broader stock market weakness came with better market leadership compared to where the market is today. More specifically, some notable large-cap technology stocks in February were showing better relative strength than they are now. So you know, I have discussed the weakening of large cap tech all week long in this here column for you.

More specifically, this Tuesday I offered my take on the Nasdaq 100 as represented by the PowerShares QQQ Trust (ETF) (NASDAQ:QQQ) and said that a next downside target is the $160 area, followed by possibly $150. From Thursday’s closing prices, those targets are another 1.7% and closer to 8% lower.

Apple Stock Charts


Click to Enlarge

Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week

Looking at the AAPL stock chart with weekly bars (candlesticks) and keeping in mind the strong correlation of this stock and the QQQ ETF, last week’s exhaustion buying is being followed through with more weakness. Upside momentum for this stock topped in the summer of 2017 and the rise in the price since has come on lower highs in momentum.

This chart now points for a re-test of the yellow 50-week simple moving average around $160 or even the February lows around $150.


Click to Enlarge

Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day

On the daily chart, we see that the red 200-day simple moving average is only a few percentage points below Thursday’s closing price. This well-followed moving average could act as a very first downside target from here, followed by the aforementioned February lows around $150 as profit target number two.

Active traders and investors could look to either short the stock or buy puts or put spreads using options with about two months left to expiration so that theta (time decay) won’t bite as much.

Alternatively, investors looking to generate income with this trade idea could look to sell out-of-the-money call spreads. To learn more about this income strategy you may register here for a free special webinar I am holding today — March 23 — at noon Eastern/9 a.m. Pacific.

As always, any strong bullish reversal in the stock that would indicate a potential trend reversal back higher would signal a stop loss.

Check out Anthony Mirhaydari’s Daily Market Outlook for March 23.

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