Apple (AAPL) - Get Report looks like it's in for a rough day this Thursday after issuing an earnings warning, but charts say that the key level to watch will be around $142 (vs. Wednesday's close at $157.92).
Let's check out this three-year chart of the stock:
This chart shows that Apple began a nearly three-year uptrend in earnest in May 2016, but that this ended around October. I believe the algos will home in Thursday on about $142, which represents the 61.8% retracement level of this entire move. That's a key Fibonacci level.
This will put a level between $141.50 and $142 in play -- but hopefully, we'll see the stock hold at that support level. However, should the weight of the broader marketplace become too much, then selling will beget selling and this area could crack. It's at that point that many algos will recognize this area as a new short-term resistance point for the stock.
But remember, piercing a trading level once doesn't mean that that the level has been inexorably broken. In my opinion, a stock must fail a test from the other side at least once to truly know that it's broken through a support level.
Should this $142-ish spot hold at first, more in the way of heavy traffic will follow as the crowd of analysts start copying each other and lowering their target prices. My feeling is that target prices start dropping into the mid-$170s.
Stock of Day
Apple is the Stock of the Day at Real Money, our premium site for active traders. Click here for a free trial subscription to Real Money, where you can read other great analysis of Apple's woes from our columnists, including:
- James "RevShark" DePorre: Apple's Earnings Warning Could Tell Us Whether the Market Is Ready to Bottom
- Helene Meisler: Apple Will Be the Market's First Big Test in 2019
- Ed Ponsi: Apple Is a Symptom of a Bigger Problem
At the time of publication, Guilfoyle was long AAPL.