Apple (AAPL) fought to hold above its 200-day moving average, but by the close had retreated below the key level as the major averages crashed on the stock market today. The 200-day line is a last-ditch support area for growth stocks. Quickly regaining that level would be good news for long-term investors in the iPhone maker.
X Apple already plunged more than 6% last week, capped by Friday's 4.3% tumble after the tech titan reported weaker-than-expected iPhone shipments and guided low on current-quarter revenue. Apple, a member of the S&P 500 index, Nasdaq composite and Dow Jones industrial average. That stock has triggered four sell signals in the past two weeks, at least for recent Apple investors.
These sell signals were all the more glaring because Apple gave such weak buy signals. The stock cleared a 176.34 buy point in three different periods. The moves were generally modest with unimpressive volume. Also, the relative strength line, which tracks the stock's performance vs. the S&P 500 index, continued to trend lower.
Meanwhile, iPhone-related stocks, including Broadcom (AVGO), Skyworks Solutions (SWKS), Universal Display (OLED) and Applied Materials (AMAT) have shown weak chart action as well. More on those later.
Here are the four sell signals for Apple.
Apple Loses Its Buy Point
Apple fell below its 176.34 entry on Jan. 24, sinking 1.6% to 174.22 in its heaviest volume since Nov. 3. The RS line, the blue line in the chart below, fell to the lowest levels of the consolidation. But the stock did find support at its 50-day moving average.
Apple Loses Its 50-Day Moving Average
The next day, Jan. 25, Apple retreated below its 50-day moving average, again in above-average trade. The 50-day line is the red line in the chart below. That capped a 3.9% weekly decline as the RS line fell to its worst levels since July. Apple shares kept falling for the next few sessions, pushing the RS line to mid-June lows.
Apple Triggers 7%-8% Sell Rule
Just ahead of Apple's Thursday night earnings report, Apple bulls could still talk themselves into believing that expectations of lowered guidance were already priced in. And in after-hours trading Thursday, Apple shares did rally, even hinting at a move back to the 50-day moving average.
But on Friday Apple fell 4.3% to 160.50 — 9% below the 176.34 entry. When a stock falls 7%-8% below a buy point, it's an automatic sell for recent investors.
Apple Round-trips October Breakout
Friday's move triggered yet another sell signal, this one for the Oct. 27 breakout from a cup-with-handle base. The stock ran up nearly 12% from that 160.97 buy point and then round-tripped. You never want to see a 10% gain go to zero.
So if you bought Apple from the October or January breakouts, there were definite reasons to sell.
Apple Plays
While not sell signals for Apple, the action of many iPhone-related stocks gave wavering Apple investors additional reasons to take profits or cut losses.
Chipmakers with heavy Apple exposure fared even worse than their big customer, falling with other semiconductors in December and continuing to slump in January. Broadcom, Skyworks Solutions and Qorvo (QRVO) hit multi-month lows while their RS lines hit 52-week lows. Broadcom gave bullish preliminary revenue and guidance last week, but the share gains were muted. Qorvo did roar back last week, despite slashing guidance late Wednesday, providing some hope that the bad news was priced in for the Apple ecosystem. But much of Qorvo's gain stemmed from a big new iPhone contract win.
Qorvo lost 6.4% on Monday.
Applied Materials is a chip-gear giant that also makes equipment for producing OLED screens. OLED screens are used on the iPhone X and other high-end smartphones and displays. Applied Materials came pennies from a cup-with-handle buy point on Jan. 25, but reversed lower. Last Tuesday, shares fell below their 50-day moving average. On Friday, shares slid 4.9%.
On Monday, shares sank 4.7%, undercutting their 200-day line.
Universal Display, which makes technology for OLED displays, broke out on Jan. 8, though the RS line was lagging somewhat. Shares rose solidly over the next two weeks, but reversed sharply lower after a Jan. 19 peak. On Jan. 23, Universal Display fell below its buy point. On Jan. 24, the day Apple undercut its buy point for the last time, Universal Display tumbled through its 50-day line, dropping as much as 10% below the entry point, making it invalid.
Shares have continued to slide, falling 5.9% on Monday. They've erased most of the gains from a short base-on-base buy point initially cleared on Oct. 31.
Long-Term Decision
If you bought Apple at the January 2017 breakout from a 118.12 cup-with-handle breakout, you're still sitting on a big gain. There's no glaring sell signal. But the reasons for holding the stock have become less compelling. Since late February, Apple has merely matched the S&P 500 index, with clear underperformance for the past three months.
Apple fell to 158 soon after Monday's open, undercutting its 200-day moving average for the first time since July 2016. Shares rebounded as high as 163.88 but then succumbed to the broader market. Shares closed down 2.5% to 156.49 in more than double normal volume.
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