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Chart Of The Day: Apple To $125

Published 07/19/2022, 09:39 AM
Updated 07/09/2023, 06:31 AM
US500
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  • Apple to slow hiring and spending 
  • Further evidence of slowing economic growth
  • I expect AAPL stock to move lower
  • It seems Apple (NASDAQ:AAPL) has joined Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) with plans to cut costs and reduce hiring.

    The news that the iPhone maker is cutting spending compounded investors' concerns of an economic slowdown, if not an outright recession. It drove Apple shares down over 2%, weighing on the S&P 500, which fell 0.84%, ending a two-day advance.

    The world's most valuable company is scheduled to release corporate results on July 28 after the closing bell. Analysts are forecasting $82.44 billion in revenue, up from $81.43 a year ago and EPS of $1.15. Zacks Equity Research expects the tech giant to continue beating earnings estimates.

    So, will the smartphone giant maintain its string of earnings beats? I honestly don't know and I don't care. In my opinion, it's too late for Apple shares as they are in a downtrend and I expect them to continue to slide. 

    Apple Daily

    The shares topped out, cementing a peak-trough downtrend.

    The 50 DMA plunged through the 200 DMA, triggering a Death Cross, a technical event that even fundamental analysts consider. Then, the 100 DMA followed suit, falling below the 200 DMA, putting all three major MAs in bearish formation, with each shorter MA below its respective, longer counterparts. This pattern demonstrates a broad breakdown in pricing.

    On June 1 the stock tried to regain a footing above the $150 level, where the top's neckline is, but failed, confirming its integrity. Yesterday, it tried again, revealing just how strong the bearish presence at this price level is. This repeated attempt on the neckline solidifies its resistance because it shows enduring selling pressure and attracts speculators to exit longs and place short orders when they identify the opposition.

    Based on its height, the pattern's implied target is $127.

    Trading Strategies

    Conservative traders should be content with yesterday's drop, which fell 3% below the neckline, satisfying the price filter to avoid a bull trap. However, they should now wait at least three days to employ a time filter, during which the price remains below the $151.78 level, before risking a short position.

    Moderate traders would be content with just a two-day filter in which the price remains below the top.

    Aggressive traders can short now, provided they can withstand potential whipsawing. Therefore, tight, disciplined money management is crucial for this risk level.

    Here's a generic trade example. A customized plan incorporating your timing, budget, and temperament will provide superior results overall.

    Trade Sample - Aggressive Short Position

    • Entry: $148
    • Stop-Loss: $151
    • Risk: $3
    • Target: $130
    • Reward: $18
    • Risk-Reward Ratio: 1:6
     
     

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