Apple Slides As Xi Jinping's COVID Policy Threatens Revenues: Why A Bounce Looks Likely

Zinger Key Points
  • Apple is trading in a downtrend within a falling channel pattern on the daily chart.
  • If Apple holds above the lower trendline of the pattern, a bounce could be in store for Tuesday.
Apple Slides As Xi Jinping's COVID Policy Threatens Revenues: Why A Bounce Looks Likely

Apple, Inc AAPL gapped down almost 2% to start Monday’s trading session. Although the stock inititally popped to fill most of the upper gap, Apple slid back toward its opening price intraday.

Rare protests erupted in China over the weekend after the government continued to tighten its COVID-19 restrictions. China is Apple’s major production hub and ongoing strict lockdowns in the country, paired with protests, threaten to negatively impact the company’s sales during the lead up to the holiday season.

Many Apple stores are already grappling with iPhone Pro shortages of up to 35%-45% of typical inventory. Wedbush analyst Daniel Ives believes 5% to 10% of Apple’s iPhone unit sales could be impacted during the fourth quarter.

Read more about what the analyst said here

Apple stock reversed into a downtrend after reaching a Nov. 15 high of $153.59 and has settled into a falling channel pattern on the daily chart. The pattern is considered bearish until a stock breaks up from the upper descending trendline of the channel on higher-than-average volume.

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The Apple Chart: On Monday, Apple was testing the lower descending trendline of the channel as support and holding above the area. If the stock closes within the channel, a bounce on Tuesday, at least to the median line, could be in the cards.

  • If Apple closes the session between $143.50 and $145.50, the stock will print an inverted hammer candlestick, which could indicate a bounce will come on Tuesday. If the stock climbs to close the trading day near its high-of-day price, Apple will print a bullish Marubozu candlestick, which could also indicate higher prices are on the horizon.
  • The next most likely scenario is that Apple prints an inside bar on Tuesday to consolidate Monday’s downturn. If Apple falls through the lower trendline of the channel on higher-than-average volume, the pattern will be negated and the downtrend is more likely to continue.
  • Apple has resistance above at $146.41 and $150 and support below at $143.41 and $139.96.

See Also: 6M Shortfall In Apple iPhone Pro Models - China's Foxconn's Plant Outrage Impact On Apple

Photo via Shutterstock.

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