A Look At Apple As The Stock Continues To Pull The Market Lower

Zinger Key Points
  • Apple broke bearishly down from a falling channel pattern on Friday.
  • On Monday, the stock attempted to pop up into the channel but was rejecting the lower trendline.

Apple, Inc AAPL was bouncing up slightly on Monday after four volatile trading days, which have seen the tech-giant make a series of large daily swings.

Despite the intraday volatility, Apple has declined 9.5% over that time period compared to the S&P 500, which has slid almost 3%. With Apple weighted the highest within the index, the stock's bearish price action can drag the S&P 500 lower.

Michael Khouw of Optimize Advisors said on CNBC's "Options Action" that he’d noticed the volume on Apple puts was 1.5% of its average on Thursday, indicating traders and investors believe the stock has more downside.

A report last week indicated demand for Apple’s new iPhone line-up has decreased. As a result, the big-tech company has pulled back on its plans to ramp up production.

The analyst reactions were mixed following the news. BofA Securities analyst Wamsi Mohan lowered the price target from $185 to $160, while Rosenblatt analyst Barton Crockett bumped up the price target from $160 to $189.

From a technical standpoint, Apple looks set for at least a short-term bounce, after having printed an inverted hammer candlestick on Friday.

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The Apple Chart: When found in a downtrend, an inverted hammer candlestick can indicate the temporary bottom is in, but candlesticks are lagging indicators, meaning the next candle on the time frame has to print for verification. Candlestick patterns are most successfully used in combination with other indicators for more confidence.

  • Apple’s relative strength index (RSI) also indicates a bounce may be in the cards over the coming days because on Friday, the stock’s RSI was measuring in at about 29%. When a stock’s RSI reaches or falls below the 30% level, it becomes oversold, which can be a buy signal for technical traders looking to scalp a bounce.
  • On Friday, Apple dropped bearishly down from a falling channel pattern on the daily chart, which is bearish. On Monday, the stock bounced up but rejected the lower descending trendline of the channel as resistance, which indicates the pattern is recognized.
  • Bullish traders will want to see Apple rise back up into the channel in short order, while bearish traders will want to see the stock continue to reject the channel, which could indicate the steep downtrend will continue.
  • Apple has resistance above at $139.96 and $143.51 and support below at $137.33 and $132.93.

See Also: Apple, Tesla, Coinbase And Why Investors Don't Expect A Midterm Election Market Rally: Weekend Stock Spotlight

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