This year marks the 10th anniversary of Steve Jobs’ introduction of the Apple iPhone, an event that is being celebrated on Sept. 12 with the widely anticipated iPhone 8 launch. This next generation iPhone could be a revenue driver for the company long term, but there are recent questions about production delays. In addition, noted Apple analyst Gene Munster said on CNBC this week that Apple shares could fall as much as 10% over the next three months as the hype over the new phone wears off.
The technical picture supports the selloff scenario, but that doesn’t mean you should short the stock ahead of Tuesday’s event. Watch the integrity of the following key technical support level on the chart, to determine the intermediate-term direction of the stock price.
An hour before the close, shares were seen at $158.93, down $2.30 or 1.40%.
The weekly chart shows the stock making a series of lower highs in 2015 and early 2016, above horizontal support in the $90.00 area. This price action formed a very clear downtrend line and when that line was broken to the upside, a little more than a year ago, the stock reversed trend and began moving higher. The subsequent rally saw the share price increase by over 60%, again forming another strong trend line. There are, however, several technical indications on multiple time frames that suggest the move may be losing momentum and could, once again, reverse direction.
The TRIX indicator, which is a triple exponentially smoothed moving average designed to filter out insignificant price movement, is making a bearish crossover. Previous crossovers preceded the previous bullish and bearish shifts in trend. Another negative indication is the Chaikin money flow reading which, while still in positive territory, has declined sharply and is reflecting distribution into the most recent leg of the rally.
Apple shares gapped higher this month, taking out the May high resistance level in the $155 area. They successfully retested that support several times and then went on to make a new high this month. In the process, they formed a small rising triangle pattern and this week, they’ve moved back into lower Bollinger band range and are currently testing the triangle support line. Moving average convergence/divergence made a lower high last week as the stock was making a higher high, in bearish divergence to price, and the stochastic indicator is tracking lower. These readings reflect a developing underlying weakness in price momentum. Like its weekly indication, daily Chaikin money flow is also declining, suggesting a loss in buying interest at the stock’s current level.
The very recent downside momentum is moderate and if it continues at its current pace, it sets up a rendezvous in price and time at the intersection of gap support and the Sept. 12 announcement. How the stock reacts at this critical juncture could determine if the uptrend continues intact or the stock transitions into a new downtrend.