Apple's Chart Indicates A Tough Start To 2016 Ahead
• Apple Inc. (NASDAQ: AAPL) has disappointed shareholders with a 3.4 percent decline in 2015.
• Despite bullish valuation metrics, the stock’s chart looks extremely weak from a technical perspective.
• If Apple’s technicals don’t improve, the stock may soon bet headed back to re-test its flash crash lows at around $92.
Apple’s stock has delivered a lackluster return in 2015 of -3.4 percent. Despite record profits and favorable valuation metrics compared to its peers, Apple’s chart looks extremely challenged heading into 2016.
Apple experienced a death cross back in August and dropped below its 50-day simple moving average (SMA) earlier this month. In addition, its early November peak at $123 fell well short of its previous peaks at around the $132 level in February, April and July.
In fact, the triple top is an extremely bearish indicator in itself. As if there weren’t enough technical signals that the $132 level was a major market top for Apple, Benzinga observed back in April that Apple experienced a bearish engulfing at the peak of its chart, a signal that a stock may have topped.
Related Link: New Bearish Technical Signal In Apple's Chart
To make matters worse, Apple’s 2015 trading seems to have formed a head and shoulder pattern, another notoriously bearish technical formation that indicates the end of a long-term uptrend.
For Apple shareholders, the bearish chart is certainly frustrating. Not only is Apple raking in more profits than ever, its valuation fundamentals, including PE ratio, PEG and P/FCF, all indicate that the stock is a much better value than its high-flying large tech peers.
What To Watch For
From a technical perspective, shareholders should be watching the two key support levels indicated by the green lines in the chart below.
The first line represents the $102-$105 level that, aside from the August flash crash, has served as short-term support going back to late 2014. If Apple falls below that support level, it will likely re-test the $92 level where it found support during the flash crash and several times in the second half of 2014.
Apple bulls could breathe a sigh of relief if the stock can climb above $123 and re-test $132, but a move that sizable would likely require a major catalyst and/or several months of positive momentum.
Disclosure: the author holds no position in the stocks mentioned.
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