From bruised to downright rotten price action, the worse may be yet to come for Apple (NASDAQ:AAPL). Nevertheless, a deep correction into key zone support demands putting AAPL stock on the radar for a longer-term buying opportunity. And it’s an opportunity that may be setting up well for contrarian investors right here, right now.
Let me explain.
To steal a line from POTUS, since hitting an all-time-high of $232.66 in early October, AAPL stock has been a total disaster for investors. Not that the suffering Apple bulls are feeling is unique. Still, over the past couple months, shares have retreated by a stunning 37% and relinquished their top spot in market capitalization to Microsoft (NASDAQ:MSFT).
Everything from escalating trade war tensions, supply chain warnings, weak sales guidance, elevated global recession concerns to continued broad-based market weakness and maybe even the kitchen sink have conspired to weigh on AAPL stock and turn shares into a leading bearish barometer.
Now Apple stock investors can add a few more grievances to point fingers at following a pre-holiday bag of coal dumped onto the broader market in Monday’s abbreviated session.
Apple shares tumbled by a punishing 2.59% to hit 15-month lows on bearish-sounding ammunition ranging from Treasury Secretary’s Mnunchin’s out-of-left-field questioning of bank liquidity, worries over a partial U.S. government shutdown and Federal Reserve Chief Powell being squarely in the crosshairs of a miffed POTUS following the recent rate hike.
The good news in all of this is the aggressively bearish price action and Monday’s camel-breaking fearful sentiment has left Apple in a much stronger position to suggest the end is near, but in a better sort of way for AAPL stock bulls.
AAPL Stock Monthly Chart
It wasn’t long ago that I was optimistic that a kinder and gentler sort of correction in AAPL stock was setting up. But admittedly a potential bottom in mid-November was not meant to be and technical supports eyed for defending shares quickly fell to the wayside.
Currently and with AAPL shares having shed an additional 23%, it’s time to revisit Apple as a contrarian, deep-value candidate. That’s not to say a bottom is in and the monthly stochastics don’t support that kind of adamant defense either. However, a spike in volatility readings associated with past panics and AAPL stock’s stiff correction are compelling. Shares are now in a well-established support zone from roughly $120 – $150. The basis for this key technical zone goes all the way back to the financial crisis and is officially in play following Monday’s drop below the 38% retracement level from Apple’s January 2009 bottom.
For Apple stock investors agreeable with approaching shares as a deep value bet, beginning to accumulate a small position makes sense given what’s been discussed. From today’s undersized position, looking to increase a long stake in Apple shares on continued weakness or signs of stabilization within the technical zone over the next few to several weeks is a favored approach.
Alternatively, and for options spread traders, an unorthodox combination of buying the April $155 / $170 / $185 call butterfly and selling the April $130 / $120 put spread for even money is a way to limit risk with no money up front, while offering a nice blend of risk-to-reward potential.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.
