PreMarket Prep Stock Of The Day: Apple

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

With S&P 500 index backing off its all-time high made last Monday, investors are contemplating whether or not to buy the dip. With that being such a vague term, let’s get specific as the top component in the index is Apple Inc. AAPL, making it the PreMarket Prep Stock Of The Day.

Post-Earnings Retreat: White the overall index has gone into retreat mode over the last few sessions, Apple has been under selling pressure since its blowout earnings report released after the close on Jan. 27.

Keep in mind, the issue had a stealthy pre-earnings rally in only five trading sessions that on a closing basis moved from its Jan. 19 close ($127.83) to a new all-time closing high on Jan. 26 ($143.16).

The great report wasn't good enough and Apple's stock shed $10 in the following two sessions to $131.96. After a dead-cat bounce up to the $138 level, the heavy selling resumed.

Looking For A Bottom: Apple was weak on Monday, falling from $129.97 to $126, and closed just off the low for the session ($125.50). Since the pre-earnings rally emanated from its Jan. 19 low ($126.94), some investors may have been looking to “dip their toe in the water.” With the issue settling near the low for the day, the merits of a long entry at that level were less valid.

Using hindsight in investing is a slippery slope. However, the weak close in Apple coupled with the weak close in the index may have a clue that a lower entry was on the horizon.

Tuesday Tank And Rebound: With the index futures under heavy duress off today's open, Apple was set to tumble. After a much lower open, which stands only a few pennies from the high ($123.79) as of 10:30 a.m. ET, the issue went into freefall with the index.

Apple breached another possible support level at the multiple lows at $120 area from December falling to $118.39. That marked the lowest level for the issue since it bottomed on Nov. 30 ($116.81).

Just as the index turned around on a dime around 10 a.m., so did Apple. It has battled back to make a new intraday high and is attempting to enter the $124 handle as of 11 a.m. ET.

Moving Forward: Since the issue has distanced itself from the current low, it may have found a short-term bottom. Therefore, if one was attempting to go long at the $123 area, that low may be a potential exit point if the rally fails.

Apple has some work to do on the upside over the next few days. First things first would be making a new high for the day at least reaching the bottom of Monday’s range ($125.50) and close ($126).

If looking for a longer-term target, based on Tuesday’s low staying intact, the next potential area of resistance may fall between its previous four daily highs ranging from $129.72 to $132.22.