NEW YORK (TheStreet) -- Apple Inc (AAPL) - Get Report is arguably the most popular company on the planet. The stock became one of the 30 components of the Dow Jones Industrial Average at the close of trading on March 18 with the stock at a price of $128.47 per share. If shares of Apple break below its 50-day simple moving average at $122.68, and end the week below its key weekly moving average at $123.04, the stock is at risk to lose its year-to-date gain of 12%.
Investors can track this risk looking at the "must see" daily and weekly charts provided below.
Apple joined the Dow 30 after setting a record intraday high of $133.60 on Feb. 24, and the close of $123.25 on Friday, March 27, was 7.7% below the high, but with a gain of 12% so far in 2015.
Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share price direction.
Let's look at the daily chart for Apple.
Courtesy of MetaStock Xenith
The daily chart for Apple shows the daily price bars for the last 24 months. The blue line is the 50-day simple moving average and the green line is the 200-day simple moving average.
Looking from left to right, Apple shares were trading below its 200-day SMA until Aug. 13, 2013, when the average was $67.21. Once that crossover occurred, the 200-day SMA became an important technical support which held at $72.76 on April 15, 2014.
Looking back to Sept. 12, 2013, note that the 50-day simple moving average crossed above the 200-day simple moving average in what technicals call a "golden cross," which solidified the upside for shares of Apple.
The daily chart is important to use during earnings season as a stock can have price gaps up or down in reaction to results and company guidance.
Apple had a price gap higher as shown in the middle of the graph from Apple's close of $74.96 on April 23, 2014, to the open of $81.17 on April 24. This gap was a result of positive earnings guidance reported after the closing bell on April 23.
There was another earnings price gap on Oct. 21 and again on Jan. 28, which led the stock to its record intraday high of $133.60 on Feb. 24.
Now that you understand the daily road map, here's the technical warning. If shares of Apple gap below its 50-day simple moving average at $122.68 the downside risk is 12% to the 200-day simple moving average at $107.77.
Let's look at the weekly chart for Apple.
Courtesy of MetaStock Xenith
The weekly chart for Apple shows the weekly price bars going back to the beginning of 2009 when the current bull market for stocks began.
The red line is the key weekly moving average that tracks the price bars. The green line is the 200-week simple moving average. Apple has been above this key longer-term trend since the week of March 27, 2009, when the average was $13.79.
This chart shows that Apple had a significant 45% correction from the high of $100.72 set during the week of Sept. 21, 2012, to the low of $55.01 set during the week of April 19, 2013. Holding above the 200-week SMA was a key to the rebound since then.
In addition to tracking the ups and downs for a stock an important component of technical analysis is having a measure of momentum. The momentum reading shown in red along the bottom of the weekly chart scales between 00.00 and 100.00, where readings above 80.00 show the stock overbought and readings below 20.00 indicate oversold.
Note that shares of Apple were overbought at the September 2012 high and oversold at the April 2013 low.
Now that you understand the weekly road map here's the technical warning. If Apple ends this week below its key weekly moving average of $123.04, the weekly chart will be negative as the momentum reading is declining below the overbought threshold of 80.00 at 74.57.
The downside risk is 36% to Apple's 200-week simple moving average of $78.89.
Between 1984 and 1988 I developed proprietary analytics based upon a stock's last nine years of closes. My technical model provides key levels for the week, month, quarter, semiannual and annual timeframes.
Here's how to use the key levels for Apple.
Investors looking to buy Apple should place good-till-canceled limit orders to purchase the stock if it drops to $112.97 and $110.43, which are key levels on technical charts until the end of June and to the end of 2015, respectively.
Investors looking to book profits should place a good-till-canceled limit order to sell the stock if it rises to $136.60, which is a key level on technical charts for this week.
The month of March and the first quarter will end Tuesday. On Wednesday, April 1, my technical model will have new key levels for April and for the second quarter.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.