Should investors consider a position in AAPL now that it’s been kicked in the teeth? Let’s take a look at the chart and see where it stands technically. Here are my observations:
- The stock has moved quite nicely through two cycles of the 4 market phases –please refer to my book Sideways for more information on identifying the phases and how to trade them. We are clearly in phase 4 downtrend at this time.
- Leading the phase 4 downtrend is the break below the 200 day MA and successive lower highs.
- Fairly significant support resides around $93, as indicated by my horizontal dashed green line. This level has been tested several times, and suggests some failure of the phase 4 downtrend noted above—the lows have not been getting lower.
- MACD and RSI have trended down with the stock’s decline. Both diverged against Apple’s flat highs in the late 2014, early 2015 period—particularly RSI.
- Moneyflow has been flat since late 2014
- Stochastics, not surprisingly, is hooking down.
My thoughts: If $93/sh. holds over the next week, this may be a trading opportunity. Not an investment – a trade—and that comes with a difference in mentality and risk tolerance, should you choose to play such a trade.
The stock will need to take out its last high of $110 to be considered safely out of its down trend. However, a bounce off of $93 support could carry it anywhere near that area. You wouldn’t want to buy until $93 is proven that it won’t be broken, and that’s going to take at least a week or two to prove valid. I’d rather buy this stock at $95 or $96 to trade a more likely swing upwards.