Apple Inc. (NASDAQ:AAPL) stock is on a continuous downtrend since the September 12 launch event. Is a bottom in sight for AAPL stock?
Shares of Cupertino, California based Apple Inc. (NASDAQ:AAPL) have had a rough couple of days. AAPL stock has come under pressure lately, falling from its all-time high of $164 a share, all the way down to $151 a share. Apple stock has lost nearly 8% of its value since the beginning of September. The quality concerns and tepid sales of its latest products haven't helped much either. While we believe that the Apple's long-term growth story is still intact and it also happens to be one of our top stock picks from the tech sector, which have beaten the NASDAQ by over 152%, but, what about the near term move? Will AAPL stock continue to move lower? Or, is a bottom in sight for Apple stock?
Technical indicators show mixed signals for Apple stock.
While a lot of negative news has emerged in the last couple of days, still majority section of the investing community is bullish on AAPL stock in the long-term and many would be looking for a good entry point to buy into the stock. Is this that entry point? Probably not. It would be better if investors take a wait and watch approach. While some technical indicators imply that Apple stock might have bottomed out for now, others suggest that the correction may not be over. Apple's 100-day simple moving average(SMA) has acted as a strong support for the stock in 2017. However, Apple stock has breached this support level on Friday. That's normally interpreted as a bearish signal. What it also means is that AAPL's 100-day moving average is now acting as a resistance. Previously, in the middle of last week, Apple shares had also made a bearish crossover with its 50-day SMA. Presently, the stock trades below all its key moving averages except the long-term 200-day SMA.
Coming to the Moving Average Convergence Divergence (MACD) indicator, Apple's MACD line also fell below the center line last week. The gap between the MACD line and signal line has also been increasing, and that's generally a bad sign. All of these signals point towards the possibility of a further downside. However, there are also some positive signals, if you look at the Relative Strength Index (RSI), and the Bollinger Bands.
The RSI measure for Apple is currently 21.35, well below the oversold threshold of 30, which suggests that the stock is in oversold territory. As mentioned earlier, Apple stock has bottomed out based on the Bollinger Bands indicator as well. The share price has also fallen below the lower band last week, signaling an oversold condition. The combination of the above two indicators is often considered as a strong signal. The above two indicators suggest a bottom in Apple stock is around the corner.
Slow iPhone 8 sales may not be as bad it seems.
One of the reasons for the negative sentiment around AAPL stock is the somewhat muted enthusiasm received by iPhone 8 sales, which is very unlike new iPhone sales. Well, if Morgan Stanley analyst, Kate Huberty's analysis is to be believed this could be actually very good news for Apple Inc. She opines tepid iPhone 8 sales could mean more demand for iPhone X which is the best case for the Cupertino giant from a financial standpoint. Huberty states that the more expensive, high margin iPhone X would boost Apple revenues and profits. For the latest quarter, Apple is expected to deliver a revenue of $50.25 billion, which also includes iPhone 8 sales. A miss on the revenue front because of lukewarm iPhone 8 sales would be a wrong signal to investors as Apple rarely misses revenue estimates. However, there might be a silver lining for Apple Inc in that also, if that miss is caused because customers are waiting for iPhone X.
The recent negative sentiment around Apple stock on account of slow iPhone 8 sales seems to be overdone as it is too early to judge. Even the less demand of iPhone 8 bodes well for the tech behemoth as discussed earlier in the post. Coming back to Apple stock price movement, the stock could see more downside, as the next meaningful support is 2.5% below the last closing price at the $148 mark. The recent downtrend in AAPL stock price has not been accompanied by an increase in the put-call ratio, in fact, it has decreased, implying investor sentiment is not overly bearish. The put/call ratio is an important indicator of what investors/market participants expect a stock to do in the near future. A put/call ratio greater than 1 indicates a negative investor sentiment while a value lesser than 1 indicates a bullish investor sentiment. Given this development and the technical setup, it seems that a bottom in Apple stock is right around the corner. However, investors would do well to wait for a breakout, accompanied by strong volumes, to buy more Apple shares.
Interested in automotive stocks? Then, we also have our top picks from the auto sector, which have beaten the S&P 500 by a massive 265%. If you're a trader though, you should check out our daily trading ideas section for daily, free updates on the latest crossovers and other popular technical signals.