Taking a Bite Out of Apple

Brandon Wendell
Instructor, CMT

I am reflecting on an interesting day in the markets as I write this article. A hacked Twitter account belonging to the Associated Press triggered a panic in computerized trading that caused a massive drop in the markets. Apple released earnings and offered a mixed picture. The after-hours trading belied the thoughts of investors for the beaten up stock.

aapl earnings

In the morning before trading, Abigail Doolittle a technical analyst was on CNBC who stated that she believed that AAPL was headed to $321 a share.  Remember that this was before the earnings.  I watched incredulously as the anchor made light of her call.  He even turned to Henry Blodget who offered commentary about how great the Apple stock would be at these budget prices.  This is the same Blodget who lost much of his own personal money in the dot com bubble burst and was banned from securities trading for life for fraudulent reports.

Getting back to Apple’s stock, in class I had discussed a price target of $385.  We recently reached that level and with the reaction to the mixed earnings news, I doubt that the downtrend is likely to break any time soon.

aapl daily downtrend

So that brings me to the longer term view.  I have to agree with Abigail.  The weekly charts do not show any meaningful demand until we reach $310 to $327.  If there is any sort of rally in price it is likely to be met with strong supply as past rallies have been.  Considering the weakness that the buyers have shown in past rallies, there may be shorting opportunities for the summer.

aapl weekly decline

AAPL is still a heavy weight on the NASDAQ index and with the “sell in May and go away” mentality for tech stocks, there may not be a lot of bullish pressure to stop the further decline of the tech giant.  Remember to trust your charts and trade with your rules.

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