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Sell Apple on iPhone Production-Cut Reports? Check the Chart.

Apple stock is falling for a fourth session, this time thanks to a report of a potential iPhone production cut. Here are the key levels to know now.

Apple  (AAPL) - Get Apple Inc. (AAPL) Report stock on Wednesday has bounced off the lows but remains down about 1%.

That’s even as the Nasdaq is higher on the day, along with all of the FAANG components and Microsoft  (MSFT) - Get Microsoft Corporation (MSFT) Report.

Tuesday was a busy session for Apple. First, the company announced a new event for next week as it plans more product releases.

And after the close, a media report said that Apple’s iPhone production would take a hit due to a chip shortage.

The blame was pinned on shortages from Broadcom  (AVGO) - Get Broadcom Inc. Report and Texas Instruments  (TXN) - Get Texas Instruments Incorporated Report. Both stocks are gently down on the day.

One analyst, Morgan Stanley’s Katy Huberty, has already come to Apple’s rescue

“We are buyers of any near-term Apple share price weakness on iPhone supply-chain disruption,” she reasoned.

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How the Long Tech Rally Evolved

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Daily chart of Apple stock.

Daily chart of Apple stock.

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The Federal Open Market Committee release is due later today, while earnings are just getting started with the report from JPMorgan  (JPM) - Get JPMorgan Chase & Co. (JPM) Report and Delta Air Lines  (DAL) - Get Delta Air Lines, Inc. Report this morning.

In other words, we may not be out of the volatility woods.

Previously, I had been looking for Apple to find support from the $138 area, the prior high from last summer. That bounce level played out perfectly.

Unfortunately, though, Apple stock couldn’t reclaim the $145 level and the declining 21-day moving average.

It hasn’t taken out the October low yet, but it is putting in its fourth straight daily decline. 

Will it continue to fall into next week’s event? Perhaps. How the market handles the Fed news may be a driving force as well.

When Apple failed at $145, it gave us the “D” leg in an “ABCDE” correction.

At the very least, that leaves the October low in play near $138.25. A move below $138 opens the door to the 200-day and 10-month moving averages. That’s also where the 161.8% downside extension comes into play (measured from the “D” leg to the “C” leg).

If all these lettered correction legs are too much for you, simply keep the following levels in mind.

On the downside, watch $138. Below this mark opens the stock to its key longer-term moving averages.

On the upside, watch the 21-day moving average, which was most recently resistance. Above that opens the door to $145, then the 50-day moving average.