Apple's Chart Indicates A Tough Start To 2016 Ahead

• Apple Inc. AAPL has disappointed shareholders with a 3.4 percent decline in 2015.
• Despite bullish valuation metrics, the stock’s chart looks extremely weak from a technical perspective.
• If Apple’s technicals don’t improve, the stock may soon bet headed back to re-test its flash crash lows at around $92.

Apple’s stock has delivered a lackluster return in 2015 of -3.4 percent. Despite record profits and favorable valuation metrics compared to its peers, Apple’s chart looks extremely challenged heading into 2016.

Bearish formations
Apple experienced a death cross back in August and dropped below its 50-day simple moving average (SMA) earlier this month. In addition, its early November peak at $123 fell well short of its previous peaks at around the $132 level in February, April and July.


In fact, the triple top is an extremely bearish indicator in itself. As if there weren’t enough technical signals that the $132 level was a major market top for Apple, Benzinga observed back in April that Apple experienced a bearish engulfing at the peak of its chart, a signal that a stock may have topped.

Related Link: New Bearish Technical Signal In Apple's Chart
 

To make matters worse, Apple’s 2015 trading seems to have formed a head and shoulder pattern, another notoriously bearish technical formation that indicates the end of a long-term uptrend.


Frustrating timing
For Apple shareholders, the bearish chart is certainly frustrating. Not only is Apple raking in more profits than ever, its valuation fundamentals, including PE ratio, PEG and P/FCF, all indicate that the stock is a much better value than its high-flying large tech peers.

What to watch for
From a technical perspective, shareholders should be watching the two key support levels indicated by the green lines in the chart below.


The first line represents the $102-$105 level that, aside from the August flash crash, has served as short-term support going back to late 2014. If Apple falls below that support level, it will likely re-test the $92 level where it found support during the flash crash and several times in the second half of 2014.

Apple bulls could breathe a sigh of relief if the stock can climb above $123 and re-test $132, but a move that sizable would likely require a major catalyst and/or several months of positive momentum.

Disclosure: the author holds no position in the stocks mentioned.