Facebook
Twitter
Apple (NASDAQ: AAPL) appeared on my bearish scan last night. After looking more closely at the daily and weekly charts, I think the bearish signal is appropriate.
Apple stock dropped sharply in August and hit a low of $92 on Aug. 24. That is the lowest the stock has been in the last 52 weeks. Since then, the stock has rallied back; it closed at $116.41 yesterday for a nice 26.5% bounce from the low. Unfortunately, the bounce has been so sharp that it has put the daily slow stochastic readings in overbought territory.
On the daily chart we also see that the stock is approaching its 50-day moving average. This trend line has acted as both support and resistance in the past and at this point I look for it to act as resistance.
Turning our attention to the weekly chart, we see that there are three possible resistance points converging in the $117 to $119 range. First, there is the 13-week moving average; the stock dropped below it back in June and has had hard time moving back above the trend line. The second point is the 52-week moving average, which is at $117.52 at this time. It is just starting to flatten out a little due to the recent pullback.
The third possible point of resistance was created by temporary top in the price back in the fourth quarter of last year when the stock peaked at $118.25. This three-way point of resistance is going to be a lot for the stock to overcome.
Here’s another aspect of a bearish stance toward Apple: The momentum from its recent new product event is starting to wear off after just over a week. In case you missed it, Apple announced on Sept. 9 that it will release faster, more powerful iPhones; a larger iPad geared toward professionals; and gaming and voice-activation features for Apple TV.
Consider Sentiment
If these factors aren’t enough to convince you of the bearish case toward Apple, you should also consider the sentiment toward the stock. The current short interest ratio is a paltry 1.05 and that is after rising last month. The analyst ratings are also pretty optimistic with 36 analysts rating Apple stock as a “buy” while 12 rate it as a “hold” and only one rates it as a “sell.”
I would look to short AAPL anywhere between $115 and $118 with a downside target down in the $95 range over the next three to four months. As far as a stop-loss point, I would use the $120 area, as that gives you some room should the stock make a false breakout above the three layers of resistance discussed earlier.
5 times more profitable than Apple
On Wednesday, September 9th Apple CEO Tim Cook revealed the iPhone 6S to world audiences. While Apple’s latest creation stands to be a big boon for shareholders, lost among all the commotion is this: There’s another stock set to soar even higher once the iPhone 6S is unveiled. In fact, every new iPhone release has seen this stock soar to the stars — as much as 200% in 8 months.