Wells Fargo Downgrade Catches Apple Bulls Off Guard

Apple Inc. AAPL is trading mostly flat in early Friday trading after a Thursday downgrade by Wells Fargo caught Apple bulls off guard.

Apple unveiled its highly-anticipated iPhone 7 and Apple Watch 2 this week, but Wells Fargo analyst Maynard Um wasn’t impressed.

“We see risk/reward as balanced,” Um said on Thursday, dropping the stocks rating from Outperform to Market Perform and sending the stock tumbling 2.6 percent. Apple’s stock is relatively stable on Friday in a weak trading session, but near-term risk may be to the downside.

Related Link: Apple's Big Reveal Was A Bust, Say Analysts. Will Updated iPhones And Watches Spark Sales?

The Wells Fargo downgrade comes on the heels of downgrade by BGC Financial analyst Colin Gillis back in July. BGC is much more bearish than Wells Fargo, however, setting a Sell rating and $85 target for the stock.

This week’s sell-off may have Apple on course to fill the gap it created when it delivered strong Q2 earnings back in July. The stock jumped from $97.97 to $102.75 following earnings and never looked back.

So far throughout 2016, Apple has traded mostly sideways in a wide range between $90 and $111. The $111 level served as a short-term top in April, and Apple’s August high of $110.23 was right in the same neighborhood.

For now, Apple traders should watch out for the stock closing its post-earnings gap by trading down to around $98. If the stock does dip that low in coming weeks, its behavior after filling the gap could be the best indicator of whether the uptrend will resume or Apple is headed back down to test $90 support.

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