The Apple Inc. stock has been on the skids since the release of its fiscal third quarter results on 21 July.
Compared to the same quarter in the previous year, the revenue at $49.6 billion was up by $12.2 billion, earnings per diluted share of $1.85 was up from $1.28 per share while the gross margin rose from 39.4% to 39.7%.
At the time the results were announced, Tim Cook, Apple’s CEO said, “We had an amazing quarter, with iPhone revenue up 59% over last year, strong sales of Mac, all-time record revenue from services, driven by the App Store, and a great start for Apple Watch.”
The results however do not seem to have excited investors very much, to the contrary, the Apple (AAPL, -2.60%) price has been slipping downwards steadily for the past two weeks. Technical analysis on the blue chip company’s shares is also not very encouraging territory as the stock has broken below two key bearish thresholds indicating that a new downtrend might be underway.
The stock closed 10.9% down on its February 23 record close of $133 which means that it has now entered official correction territory. When a stock falls by between 10% and 20% below a significant high, this is termed a correction while anything over 20% is called a bear market.
Apple also closed below its 200 day moving average on Monday which many technical analysts see as the dividing line between long term uptrends and downtrends. The stock has not been in this territory since 17 September 2013.
Apple was added to the Dow Jones Industrial Average (DJIA, -0.20%) after close of business on 18 March 2015, replacing AT&T Inc. After peaking on 28 April, about 6 weeks after moving onto the Dow index, it has cut the Dow average by 67 points. At its current price, Apple is the Dow’s seventh most influential member.
According to analysts, these are some important downside levels to watch for Apple’s stock.
The gap in the charts between the January 27 intraday high of $112.48 and the January 28 intraday low of $115.31 indicates to technicians the possibility of support levels in the chart gaps.
If the stock closes below $106.40, this would mean that it would have dropped by 20% from its February 23 peak pushing it into an official bear market.
The negative investor sentiment surrounding Apple stocks, despite the good results for the last quarter, is that while the results were excellent, many analysts and investors expected better, such as revenue of at least $50 billion, nor did the third quarter guidance from CEO Tim Cook didn't match up to analysts’ expectations. Concern around a decrease in demand for the new iPhone from the Chinese market is another factor causing negative investor sentiment.
The Apple story once again proves the old adage that when you’re at the top of the tree, you need to work twice as hard to stay there as what it took to get there.
MT4 Chart: Apple