Is Apple's Fall After Earnings a Buying Opportunity?

Apple is falling after reporting. Shares are now down about 20% from the all-time high. Is it time to buy the stock?
Author:
Publish date:

Apple  (AAPL) - Get Report shares were under pressure Friday, down about 5%. It’s not the reaction that bulls were hoping for after the company reported earnings. 

After the close of trading Thursday, Apple reported a top- and bottom-line beat.

However, disappointing iPhone sales left investors a bit cautious, even though the company recently rolled out its new lineup of 5G devices.

The tone on Wall Street is much different than it was a few months ago. The last time Apple, Facebook  (FB) - Get Report and Amazon  (AMZN) - Get Report all reported on the same evening (in July) it kickstarted a massive rally that propelled the Nasdaq to new heights.

Now despite strong results from the trio, all three are lower by 4% to 6% on the day. Is this a dip to buy in Apple?

Apple, Amazon and Facebook are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL, AMZN or FB? Learn more now.

Trading Apple

Daily chart of Apple stock.

Daily chart of Apple stock.

Apple continues to trade within its post-earnings wedge from July. Currently, shares are dipping into wedge support, as well as the 100-day moving average.

Should support fail in the coming days - keep in mind the presidential election is Tuesday and the U.S. nonfarm payrolls report is Friday - it opens up the $103 to $105 area.

This zone filled the first of two post-earnings gap-up sessions from July. It also marks the September low, at $103.10, which came after a sharp correction off the highs as Apple stock dipped more than 23%.

Below this area and Apple could actually set up as a very attractive dip-buying opportunity. If it fills the other post-earnings gap near $96, and possibly overshoots down to the 200-day moving average near $90, investors likely have a great opportunity in front of them.

Testing the 200-day moving average would put Apple down by roughly 34% from the highs. I don’t know if we get there, but it’s a good level to know just in case.

For bulls to regain momentum on the upside, they need to see Apple stock reclaim the 50-day moving average. This moving average has been resistance since mid-October and should Apple fail to reclaim it, it’s likely to persist as resistance in the short term.

If Apple gets above this mark and wedge resistance, it can start to rally. It will put the October high in play near $125, followed by a potential test of the all-time high up near $138.