Apple Tumbles Dragging Stock Market Lower: The Bull, Bear Case For The iStock

Apple, Inc AAPL closed Thursday’s session down 1.46% amid increasing fears the U.S. is headed toward another series of interest rate hikes into the end of the year as inflation remains stubborn.

The move lower came on higher-than-average volume, which acts as a warning sign for investors.

Volume is the total number of shares traded in a security within a specific period of time. It’s a momentum indicator used by technical traders to gauge overall interest and sentiment in a stock. Volume is also used as an indicator to confirm a trend or trend change.

When bullish trading volume increases, the share price of a stock usually moves higher whereas increasing bearish volume, when a stock is in a downtrend, usually pushes the price lower. In contrast, lower-than-average trading volume usually indicates consolidation which results in the stock trading sideways.

Apple’s tumble on higher-than-average volume dragged the S&P 500 lower, which caused volatility in the stock market to increase. Traders wishing to play the potential volatility in the stock market can use MIAX’s SPIKES Volatility products. The products, which are traded on SPIKES Volatility Index SPIKE, track expected volatility in the SPY over the next 30 days.

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The Apple Chart: Apple broke down from a rising channel pattern on Aug. 3 and entered into a downtrend on the daily chart. The most recent lower high was formed on Aug. 14 at $179.69 and the most recently confirmed lower low was printed at the $176.55 mark the day prior.

• On Thursday, Apple formed a bearish Marubozu candlestick, which suggests lower prices may be in the cards for Friday. If that happens, bullish traders looking to play a bounce may choose to wait for Apple to form a bullish reversal candlestick, such as a doji or hammer candlestick, before making an entry.
• Bearish traders may choose to wait for Apple to eventually bounce to print it's next possible lower high, which could provide a solid entry. If Apple bounces but continues its downtrend, it may find a local top at the eight-day exponential moving average.
• A bounce is likely to happen over the next few days because Apple’s relative strength index (RSI) reached about 27% Thursday. When a stock’s RSI reaches or falls under the 30% mark it becomes oversold, which can be a buy signal for technical traders.
• Apple has resistance above at $174.33 and at $177.71 and support below at $171.61 and at $167.88.

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