Apple Moves Higher, But Watch Out for this Classic Move…

Shares of Apple (AAPL) move more than 3% higher on Monday despite widespread selling in the technology sector.  The Nasdaq 100 (QQQ) – of which Apple is the second heaviest weighed component – dropped 3.25% for the day as AI stocks saw heavy selling in an AI shakeup.

Instead of selling, investors bought Apple stock on relatively normal volume. 

That buying appears to be more technically motivates as the stock recently hit “oversold” readings of its Relative Strength Index (RSI).  A stock’s RSI indicates if the price has gone up or down too fast, identifying a potential short-term reversal.  In this case, last week’s lows of $220 marked an oversold situation.

The oversold reading comes just days ahead of the company’s quarterly earnings report.  Apple is set to release its operating results for last quarter on Thursday after the market close.

It is common for a large widely watched stock like Apple to see a “buy the rumor rally” ahead of its earnings calls.

The combination of oversold bounce and a buy the rumor rally signals that Thursday’s earnings report MUST come in better than investors expect.

A flat or negative report and outlook will cause a fast reversal of any rally, causing the stock to tumble through the $220 price with a short-term target of $200.

A positive earnings report will accelerate the stock higher, though investors will want to maintain an eye on the $240 price as potential resistance.

Analysts have been downgrading shares of the iPhone manufacturer over the last two months as the popular smartphone has been losing market share globally.  Last week, data showed that the iPhone has less than half of the smartphone market in China to other phone manufacturers.

Apple shares are currently rated neutral with a short-term target of $200.  

Recommended