Shares of Apple (AAPL) - Get Apple Inc. (AAPL) Report started off lower on Monday on the back of a negative analyst report. In midday trading, shares are still down more than 2%, just under $200 per share.
Is the recent run over, or will bulls fight through the noise and push the stock back up again?
Analyst Jun Zhang of Rosenblatt Securities cut his rating on Apple to sell from hold, while maintaining his $150 price target. Based on Friday's close, that would imply about 26% downside for the iPhone maker.
Zhang contends that Apple will undergo a "fundamental deterioration over the next 6 to 12 months." He further adds that iPhone and iPad growth will be disappointing in the second half of 2019, while Apple's other products won't be meaningful enough to make up the shortfall.
Weakening fundamentals will likely drive the technicals, but so far, Apple's price action has been pretty healthy -- even on Monday's analyst-driven pullback.
Keep in mind, when the company reported its most recent results, management guided for better-than-expected revenue in the current quarter and said they believe China has already hit a trough. Let's look at the charts.
Trading Apple Stock
On the chart above, you can see how Apple stock kept bumping against $200 resistance in June, while uptrend support (blue line) guided it higher. After pushing through resistance, investors would ideally see former resistance -- $200 -- act as support now. If that's the case, it increases the odds of Apple returning to its recent highs near $205 and potentially rallying higher.
If $200 doesn't hold as support, we have to start looking at potential pullback levels.
The most obvious is the 20-day moving average, which is currently at $197.71. While AAPL stock didn't quite test this mark on Monday, its bounce off the session lows shows that bulls are willing to defend it.
I'm watching this area closely, particularly with the 61.8% retracement for the one-year range at $196.42. So there's just over $1 per share in this support zone that should buoy Apple stock if buyers are serious about keeping the name elevated.
Not far below this area is the $195 mark and the 50-day moving average at $193.64. Below the latter opens up the door to a test of the $185 to $187 level. However, short of a market-wide correction, I don't expect Apple to make its way significantly lower in the short term.
Investors bid up the stock to and beyond various key levels and moving averages, while its prior earnings report was solid. Investors don't have a reason to throw in the towel so aggressively on Apple stock at the moment.
So let's keep it simple for the time being. Over $200 and bulls can be long, while over $196.42 and the stock is still healthy. Below that and the 50-day is likely on the table.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.