Apple Inc. (NASDAQ:AAPL) was trading slightly lower in the premarket on Wednesday after struggling to close Tuesday’s trading session up 0.42%.
Stocks in the technology sector have performed poorly this year, amid traders walking away from growth stocks due to fears of how rising inflation and a series of steep interest rate hikes will impact earnings.
Apple has plunged about 24% so far in 2021 and the tech giant has started to see the effects of the current economic environment. Apple recently cut its planned production of its iPhone 14 by 3 million units, from 90 million devices to 87 million.
On Thursday, traders and investors will be watching to see if consumer price index data, set to be released by the Labour Department at 8:30 a.m., will indicate the Federal Reserve’s efforts to drop inflation are beginning to work.
Although Loup Funds' Gene Munster sees mega-cap tech stocks continuing to suffer in the short-term, the analyst believes investors will return to stocks such as Apple in 2023.
On Benzinga's "PreMarket Prep,” Munster said that "there are a couple companies — Apple and Tesla — that kind of stand out amongst the six or seven biggest tech companies." Munster anticipates Apple’s growth could come from its secondary products, such as the Apple Watch, and noted that while only about 15% of current iPhone users currently own an Apple watch, the number could grow to 50% over time.
With Apple trading in a confirmed downtrend, the stock is likely to fall lower over the coming days and weeks, although short-term bounces and even medium-term bull cycles are likely to take place. Wednesday’s price action is likely to determine whether Tuesday’s high-of-day was the temporary top or whether a rebound is still underway.
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The Apple Chart: Apple began trading in a downtrend on Oct. 28, when the stock attempted to regain the 200-day simple moving average as support but failed and wicked from the area. On Tuesday, Apple printed a long-legged doji candlestick, which could indicate a lower high has occurred and a drop to a lower low is on the horizon.
- If Apple can sharply rebound on Wednesday and trade up over Tuesday’s high-of-day, it will indicate the temporary top is likely not yet in. If Apple traders up above $142, an upper gap that exists between $142.80 and $145 is likely to fill.
- If the gap is filled, bearish traders can watch for Apple to print a possible reversal candlestick, such as a doji or shooting star candlestick, near the top of the gap, which could indicate the top is in and the downtrend will resume.
- There’s a possibility Apple has developed a bear flag pattern, with the pole created between Nov. 1 and Nov. 4 and the flag formed over the trading days that have followed. If Apple breaks down from the lower ascending trendline on higher-than-average volume, the measured move is about 12%, which suggests the stock could fall toward $123.
- Apple has resistance above at $139.96 and $143.51 and support below at $137.33 and $132.93.
