2 Warning Signs for Apple Stock

AAPL has underperformed the Nasdaq recently

Sep 26, 2017 at 2:48 PM
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We've been keeping a close eye on the struggles of Apple Inc. (NASDAQ:AAPL) stock since the company's Sept. 12 product unveil. Since their Sept. 11 close of $161.50, AAPL shares have shed 5.4% to trade at $152.74, performing even worse than normal in September. If that wasn't bad enough, our market research recently discovered two warning signs for the iPhone maker, if history should repeat. 

AAPL Stock Breaches Key Moving Average

For starters, Schaeffer's Quantitative Analyst Chris Prybal noted that Apple just crossed below its 120-day moving average for the first time in 215 days. This is the fifth-longest streak since 2000, and the first streak of more than 100 days in over two years. Similar occurrences -- or "signals" -- in the past have been bearish for AAPL. 

According to Prybal's research, Apple stock has underperformed after the 11 previous signals since 2000, compared to its "anytime" returns during this time frame. As you can see, the equity's average returns following a breach of the 120-day are lower across the board compared to the anytime returns.

For example, one week (five days) and one month (21 days) after a signal, AAPL stock was in the red, compared to an average anytime gain at these checkpoints. Three months (63 days) after such a signal, the security has, on average, gained just 1.6%, compared to an average three-month gain of 8%.

bearish AAPL stock signal


However, when looking at the breakdown of past signals below, you can see most of the short-term underperformance occurred in early 2008, while the stock market was in the throes of the financial crisis. Longer term, much of the weakness happened during two huge pullbacks after the May 2002 and October 2012 signals. 

aapl

Apple Stock Underperforms Nasdaq

Unfortunately, that's not the only bad news for AAPL shares. The equity has also underperformed the broader Nasdaq Composite (COMP), a signal that's historically preceded short-term weakness for the stock. Looking at the relative strength of Apple versus the Nasdaq, Schaeffer's Senior Quantitative Analyst Rocky White broke down the equity's historical performance when the relative strength fell below 0.96, going back to 2010, the first full year of the current bull market.

The biggest discrepancy comes two weeks after a signal, with Apple stock averaging a gain of just 0.04%, compared to its anytime average gain of nearly 1%. This underperformance continues through the three-month period, where AAPL has averaged a gain of 5.07% after trailing the Nasdaq, versus an anytime gain of 6.5%. Further, Apple shares have been positive just 60% of the time three months after this underperformance signal, compared to an anytime win rate of 71.2%

AAPL and Nasdaq

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