At the beginning of the month, there was plenty of optimism over the U.S. and China reaching a trade deal. A Twitter rant from the president put those assumptions on hold and infused a new bout of volatility into the market.
So far, U.S. equities have handled the news pretty well, while stocks like Amazon (AMZN) - Get Report , Netflix (NFLX) - Get Report and Facebook (FB) - Get Report doing their best to hold up. But Apple stock hasn't been as resilient, in part because unlike the three other companies just mentioned, it has much more exposure to China.
Roughly 20% of the company's revenue comes from China and as tensions rise, it's becoming more likely that Apple will find itself in the tariff crosshairs. If it does, either margins will take a hit or sales will suffer. It's one reason why HSBC analysts slashed their price target, leading to a 3.2% selloff in Monday trading.
The drop knocked Apple stock below $185 and has investors wondering what the next move is. Let's take a closer look at the charts.
Trading Apple Stock
$185 acted as support in March while Apple stock was working up the strength to push above its 200-day moving average. After coming off a post-earnings high near ~$215 in a rather orderly selloff, shares again found support at $185 -- and again just below the 200-day.
This time, the 200-day acted as resistance and $185 eventually failed after a week of support. The concerns over Apple's China exposure is simply too strong right now, but at some point -- shares are now more than $30 per share off the highs earlier this month, or about 15% -- investors are going to feel the pullback more than compensates for the present risks.
For now, Apple stock is in a tight downward channel (purple lines) and can certainly continue lower. Look to see how it handles a test of channel resistance and whether that resistance continues to push Apple lower or if the stock can break out over it. If it's the latter, see how the stock does with a retest of $185.
So far, the momentum-measuring MACD reading and relative strength index (RSI), which are highlighted with blue circles on the chart, do not suggests bearish momentum is waning or that the stock is oversold yet. Should AAPL stock continue lower, I would love to see a test of $175. Not only is this a notable level on the chart, but it's approximately the 61.8% Fibonacci retracement for the 52-week range. Should Apple work its way down to the level, it should at least provide a bounce.
That's the bottom line: Look for Apple stock to reclaim $185 and $191, or see if it works its way down to $175.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.