One More Thing About That Apple Stock Chart

AAPL's iPhone-related sell-off carried it south of a key long-term trendline

Jan 8, 2019 at 8:27 AM
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It was just under a month ago in this space that we discussed the significance for Apple Inc. (NASDAQ:AAPL) of its 64-week moving average, which had emerged as a new -- and immediately formidable -- layer of resistance during the course of the stock's fourth-quarter sprint from trillion-dollar market cap into bear-market territory. Last week, on the heels of a bruising single-day sell-off that sent tech stocks spiraling lower worldwide, and dragged the broader Dow Jones Industrial Average (DJI) to a loss of 660 points, AAPL closed Friday's session a full 20% below that recently identified resistance at its 64-week trendline.

During the course of Thursday's drubbing, the tech giant's market cap fell from its record-breaking 13-digit milestone to south of $700 billion. Significantly, Schaeffer's Quantitative Analyst Chris Prybal points out that the magnitude of Apple's market cap decline off its $1.12 trillion peak reached $446 billion -- a value implosion that's exceeded only by General Electric (GE), among all actively traded stocks. By Friday's close, AAPL was sitting at $148.26 per share, back above the $147.37 level corresponding with a $700 billion market cap -- but nonetheless, the one-time biggest company in the known universe is now "smaller" than Alphabet (GOOGL), (AMZN), and Microsoft (MSFT).

However, our focus this week on AAPL's chart is not on this massive round-number market cap hovering around the stock's current level, but instead on another "multiple" of the 32-week and 64-week moving averages that have played such crucial roles in defining support and resistance for the shares over the years -- namely, the 128-week moving average. This trendline, which roughly covers two and a half years' worth of trading, appears to be putting forth a fairly solid imitation of the 64-week back in late November and early December.

First, to establish the "credentials" of the 128-week, note on the accompanying chart how this moving average caught AAPL's lows from January through April of 2014, and then stepped up again to contain the panic-driven selling of August 2015. And the action around the 128-week trendline more recently -- a deep break below in late December, a test of suddenly stiff resistance here the next week, and a harsh rejection here just last week -- is very much in keeping with the pattern of AAPL's breakdown below its 64-week moving average late in the fourth quarter of 2018.

To find a comparably deep breach of AAPL's 128-week moving average, we need to look only as far back as three years ago, when this trendline was violated amid the high-volatility start to 2016. What ensued, per the chart below, was an extended bout of choppy, volatile price action, with AAPL falling to new year-to-date lows in May, and not re-establishing a firm foothold back above this long-term weekly trendline until as late as mid-December -- roughly 11 months after it was first broken to the downside.

If past is prologue, that 128-week break of a few years back may suggest that AAPL is in for a rather prolonged period of "finding bottom" in 2019 -- including the possibility of even lower lows in the weeks and months ahead -- as the shares now attempt to climb out of bear-market status and regain purchase above any number of major moving averages, including the three we've discussed here. So for those eyeing a possible Apple buying opportunity following last week's 5% haircut, we'd propose there's no particular need to rush.

aapl 128-week moving average

Subscribers to Bernie Schaeffer's Chart of the Week received this commentary on Sunday, January 6.


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