Apple Should Continue to Fall Say the Charts

Apple trades lower after the company says the coronavirus will cause it to miss its prior revenue outlook. Here's what the charts say for the stock now.
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Shares of Apple  (AAPL) - Get Report were leading the markets lower on Tuesday, falling 2.5% in the first trading session of the holiday-shortened week.

Investors have been hitting the sell button on Apple after the company warned about weaker-than-expected revenue for the current quarter due to the coronavirus.

Just a few weeks ago, Apple delivered an impressive fiscal first-quarter report. In it, management provided revenue guidance in the range of $63 billion to $67 billion. That easily topped consensus estimates of roughly $62.5 billion.

Now, management no longer expects to fall within that revenue range, as both supply and demand from China are impacting sales. However, they did say that demand outside of China has been fine.

Given the magnitude of the news, it’s no wonder Apple is Real Money’s Stock of the Day. Let’s look at the charts.

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Trading Apple Stock

Daily chart of Apple stock.

Daily chart of Apple stock.

Surprisingly, Apple is down just a few percent on the news, keeping many of its larger trends intact. It’s having a spillover effect on other names though, with Broadcom  (AVGO) - Get Report, Skyworks Solutions  (SWKS) - Get Report and other suppliers down on the news too.

While the trend for Apple stock is still in place, it’s starting to bend quite a bit. Recently, we made a case for buying Apple on the dip, highlighting several observations that showed waning momentum for the tech giant.

For instance, shares have recently tested the 20-day moving average four times in 10 days, while closing below this measure two of those four times. Prior to this series of tests, Apple had only tested its 20-day moving average three times in three months and saw an explosive rally as a result each time.

Further, I noted that Apple stock was unable to make a new 52-week high in February even though the broader markets were hitting new record highs.

So what now?

Apple is now testing into its 20-day moving average for the fifth time in less than a month, and so far it’s struggling to reclaim it. Should it lose uptrend support (blue line), then many investors will be looking for a dip down to the 50-day moving average and the $300 to $304 zone. This level has been support twice in 2020.

Below that puts $280 and the 100-day moving average on the table. Given the news, it would be hard to believe Apple stock will shake off the update and get right back to rallying - although stranger things have happened.

From here, let’s see if it can maintain above the trend and reclaim the 20-day moving average. Otherwise, a dip down into the $300 to $304 area is certainly possible.