Apple shares fell below support for six consecutive days
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$Apple(AAPL)$ investors are feeling the blues these days, as the tech giant's stock has been sliding for six straight days, accumulating a loss of 7.3%. On Wednesday, it dipped 0.3% during trading and broke through the crucial $170 mark, while the $S&P 500(.SPX)$ and the $NASDAQ(.IXIC)$ were both up about 0.8%.
So far this year, Apple's share price has dipped 12%, lagging behind the Nasdaq by a whopping 18%.
Katie Stockton, founder and market technician at Fairlead Strategies, says the stock has breached its support level around $179 to $180 in a short-term downtrend. A stock's support level is often a buying point for investors, but when a share price falls below that support level, it suggests the possibility of further declines. As a result, a breakdown of support levels is often seen as a sell signal. He said the next level of support for Apple stock is near $161.
However, Stockton's just doing a pure technical analysis on Apple's share price, not delving into the company's fundamentals, like its AI plans or new iPhone sales. But in the medium to short-term, technical analysis can still give us valuable insights into the future trajectory of the stock price. Charts are loaded with info, reflecting changes in investor sentiment over time.
Frank Cappelleri, founder of CappThesis, thinks the next support for Apple stock is around $165, pretty much in line with Stockton's prediction. If the price falls below that, the situation gets even dicier.
John Roque, Senior Managing Director and Technical Strategy Head at 22V Research, pointed out in January that Apple's chart looked weak and doubled down on his bearish view in late February. He said that Apple's share price has been lagging behind the S&P 500, hitting relative lows for the year. If the stock falls below $165 again, Roque thinks it will head down to $130 in 2021.
If that happens, Apple's trailing P/E ratio will drop to around 20, roughly in line with the S&P 500. In 2019, Apple's P/E hovered around 20.
On Wall Street, the average target price for Apple stock is around $200, about 18% higher than current levels. A year ago, the average price target was about $170, about 10% higher than the $155 market price at the time.
Despite the current slide, don't be surprised if Apple's stock starts to rebound.
William Beavington from Jefferies says Apple's stock is the most oversold relative to the $Invesco QQQ Trust-ETF(QQQ)$ exchange-traded fund since 2018, with a relative strength index (RSI) of 16.7 for a long Apple/short QQQ trade.
Beavington adds that Apple has underperformed the $NASDAQ 100(NDX)$ for six weeks straight and 11 out of the past 12 weeks. Market pessimism will become unsustainable.
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