Look Out Beneath! The Bear Case For Apple | The Conscious Investor

The large information for Apple Inc. (AAPL) this week was an enormous antitrust case from the US authorities. Whereas the end result of that exact state of affairs is unsure, one actuality that has been fairly sure is that AAPL is now not pounding larger like its “magnificent” brethren.

In the present day we’ll present how the technical image for Apple has gone from bullish to impartial to bearish, why a number of timeframes may be tremendous beneficial in separating the sign from the noise, and the way we are able to establish potential draw back aims for shares in breakdown mode.

I used to be taught, “When doubtful, zoom out.” So, with that in thoughts, let’s begin with the weekly chart.

Three issues stand out as I assessment the final seven years of Apple’s value historical past. First, the long-term story is kind of constructive, with the inventory going from under $40 to virtually $200 in lower than 5 years. The 150-week transferring common, one among my favourite long-term gauges of development, has been sloping larger, and quite a few exams of the 150-week transferring common on the way in which up have held simply high-quality.

Second, we observe a pair breaks of the 40-week transferring common, which I exploit on the weekly chart as a result of it strains up nicely with the 200-day transferring common. The final time we had a confirmed break of the 40-week transferring common was in Q2 2022, which ended up resulting in an extra decline till the eventual low in December 2022.

Lastly, the PPO indicator generated a promote sign in July 2023, when the PPO line broke down via the purple sign line. This sample tends to happen after a protracted bull section, and means that the July peak was a significant one for AAPL.

The subsequent chart we’ll assessment makes use of my Market Pattern Mannequin, a proprietary mannequin based mostly on a set of weekly exponential transferring averages. This mannequin provides a development sign for 3 time frames: short-term (a pair days to a few weeks), medium-term (a pair months), and long-term (over a yr).

At this level, the mannequin is studying short-term bearish, medium-term bearish, and long-term bullish. This strains up with our preliminary assessment of the weekly chart, in that the long-term story seems constructive, however the proof has been mounting in latest months that the July 2023 excessive was a major one for the inventory. It is price noting that the long-term mannequin could be very near turning damaging, which might be the primary bearish sign since September 2022.

Now let’s test the each day chart to see how final week’s value motion pertains to the longer-term developments we have noticed to date.

Right here, we are able to see the double high sample the place the December 2023 excessive lined up virtually completely with the July 2023 excessive. After a subsequent retest of this resistance stage in January 2024, Apple dropped from a peak just under $200 to its latest swing low round $169.

Taking the January 2023 low and July 2023 excessive as a framework, we are able to use Fibonacci retracements to establish potential draw back targets. The 38.2% stage hits proper round $169, which strains up with the September and October 2023 lows, in addition to the latest value motion for AAPL.

The red-dashed line represents a help stage drawn from the January 2024 take a look at of the 200-day transferring common. There have been 4 further exams of this help stage earlier than AAPL lastly broke under at the start of March. The previous couple of weeks have seen Apple bounce between help round $169 and resistance round $180, giving us a reasonably clear vary with which to think about the subsequent transfer for this key development inventory.

If AAPL would break under this confirmed help stage round $169, that may symbolize a brand new 10-month low and open the door to additional help round $160, and even perhaps the 61.8% retracement stage round $152. If, nevertheless, buyers turn into optimistic on Apple’s prospects regardless of the latest antitrust claims, a break above $185 would imply a sound break above resistance in addition to the essential 200-day transferring common. In that case, a retest of the all-time highs round $200 would appear a believable situation.

Essentially the most regarding function of this chart, by far, can be the declining relative energy within the backside panel. The downtrend on this collection reveals that whereas Apple has begun its short-term decline off all-time highs, the inventory has underperformed the S&P 500. Proudly owning names that underperform the S&P 500 is a positive solution to underperform the S&P 500 in your portfolio!

Whereas this week’s information on Apple has prompted many to revisit a bullish thesis on this long-time profitable inventory, a radical assessment of the weekly and each day charts tells a doubtlessly dire story that has been constructing for months. Conscious buyers know that technicals have a tendency to guide the basics, and a weakening chart is often an indication of an ominous future!

RR#6,

Dave

P.S. Able to improve your funding course of? Take a look at my free behavioral investing course!

David Keller, CMT

Chief Market Strategist

StockCharts.com

Disclaimer: This weblog is for academic functions solely and shouldn’t be construed as monetary recommendation. The concepts and methods ought to by no means be used with out first assessing your individual private and monetary state of affairs, or with out consulting a monetary skilled.

The writer doesn’t have a place in talked about securities on the time of publication. Any opinions expressed herein are solely these of the writer and don’t in any means symbolize the views or opinions of another individual or entity.