Apple stock has looked weak for the most part of 2015, and recently has arrived at a crucial juncture through both the longer and near/medium-term lens.
Bulls would be wise to respect that heavy look of AAPL stock, while active investors may find opportunities on the short side for the time being, particularly on bounces.
Feeble bounces followed by big smackdown selling days is not what a healthy stock is made of.
To be clear, I am not a long-term bear on Apple stock or Apple the company.
I think AAPL will do many more great things for a long time to come, and that ultimately should lift shares over time. What I am about to show you on the following charts are near- to medium-term concerns — something traders can capitalize on, and something that even longer-term investors should pay attention to.
The multiyear picture of AAPL stock, which quite simply shows us a scary-looking formation that technically we refer to as a head-and-shoulders top formation.
I will tell you that these big head-and-shoulders patterns rarely work out quickly (i.e., they don’t lead to immediate big sell-offs but rather take time to develop).
In the first seven months of 2015 developed a triple-top, and with the oversold bounce in the autumn developed the right shoulder of the pattern. From here, a marginal break below the black “neckline” support line should lead to another oversold bounce before Apple shares can see a better resolution lower, and they may tumble into the mid- to high $80s. That’s where longer-term investors may find better entry points to the stock again.
On the daily chart we see that the “oversold bounce” from August into early November retraced just about 75% of the entire sell-off from the July highs into the August lows. This 75% retracement also coincided with horizontal resistance as well as the stock’s red 200-day moving average. In other words, AAPL stock found resistance at a key confluence resistance area.
Instead of shorting a stock like AAPL into the hole, a better reward to risk strategy is to sell it on bounces. So, this is not a call to aggressively bet against the stock in the near-term but rather keep the bigger-picture heavy feeling of the stock in mind. Sell or short the stock on rallies upon bearish reversals. If the stock wants to remain weak it should not overcome its early November highs in the $120s.
Management and risk description
Sell/short AAPL stock on bounces, not into the hole/sell-offs
Entry: Sell short the stock or CFD upon a bounce into the $110 - $113 area
Time horizon: Into the first or second quarter of 2016
— Edited by
Non-independent investment research disclaimer applies. Read more