Apple Tests Long-Term Support

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With Apple dramatically underperforming the wider market, we shine a spotlight this tech giant as it retest key levels of long-term support.

Apple Decline Amid Market Rally: A Departure from Historical Trends

Apple's share price has declined since the turn of the year due to various factors such as slowing iPhone sales, antitrust concerns, and perceived lag in the AI race.

However, long-term Apple bulls argue that this decline is exaggerated, as corrections are common and Apple has historically rebounded from sell-offs to reach new highs.

Yet, the current situation differs from the past as Apple's decline coincides with a broader market rally, indicating a departure from its usual trend of rallying alongside a broader increase in risk appetite. This discrepancy is significant, Apple’s share price is currently down -8.61% year-to-date versus an S&P 500 index which has rallied nearly +10% during the same period.

Contrasting with its typical behaviour of rallying in sync with market gains, this deviation from historical patterns suggests a unique situation for Apple in the current market landscape.

Deciphering Apple's Price Chart: Support and Resistance Dynamics

On the price chart, Apple's long-term technical structure forms a trading range, with resistance evident at the July and December 2023 swing highs, and support seen at the swing lows formed in September and October 2023.

Support and resistance levels have the potential to influence market behavior, as they tend to reflect market sentiment and trader psychology. Traders who previously bought Apple shares in October 2023 and witnessed a subsequent 20% rally may be inclined to buy again when prices retest that support level.

However, blindly buying at support levels disregards Apple's current underperformance and the negative momentum in its share price. In recent months, the shares have formed a descending trendline, and the RSI indicator remains below 50.

Those considering buying at support levels would be wise to wait for confirmation from price action, such as a large bullish candle or a fakeout hammer candle indicating buyer interest. Such signals would suggest a resurgence in buying activity.

Conversely, a break and consolidation below the support zone would mark the end of Apple's long-term trading range and could potentially trigger a more significant sell-off.

AAPL Daily Candle Chart

Past performance is not a reliable indicator of future results

Risk Management

Apple has an Average True Range (ATR) of $3.19 – traders can use this as a baseline expectation for daily price movement and factor this into to stop placement and price targets.

On the economic calendar, Friday’s US monthly unemployment rate has the potential to increase the volatility of Apple’s share price.

Apple will release Q2 2024 earnings on Thursday 2nd May.

Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.

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