Hold On To Your AirPods: Why Apple Stock Could Be Headed For 2021 Lows

Technical analysis of trading instruments can be made very complicated and confusing. The co-hosts attempt to filter through all the jargon on the PreMarket Prep show. 

This is accomplished by focusing on the basic tenets of technical analysis: support, resistance and an issue's closing price.

There are many different ways to derive support and resistance, but the closing price of an instrument is the same for everyone.

Whether it is an institution attempting to exit a long-term position or a shorter-term trade “marked” on its profit and loss statement, exiting above or below the closing dictates how much green or red will flow to the bottom line.

The primary focus of Monday’s PreMarket Prep Show was the breach of the major support in Apple Inc. AAPL and its longer-term implications. As a result, it is the PreMarket Prep Stock of the Day.

There's No Such Thing As A Quadruple Bottom: A common phrase among followers of technical analysis is "double to triple bottoms." Just as it sounds, the double or triple bottom is described by a decline in a security or index price, a rebound, then another drop to the same or similar level as the previous one.

On many occasions, if a triple bottom is formed, the fourth attempt to breach that is usually the last and leads to lower prices.

The Apple Setup: With stocks over $100 and in this decimal-laden world, one has to give a few pennies here and there to describe the aforementioned formation. For Apple, it was pretty darn close.

On Oct. 13, Apple bottomed at $134.32, rebounded to $157.50 in late October and faltered.

The next two daily lows in this area came very close to each other. On Nov. 4, the issue bottomed at $134.38, then two days later on Nov. 9 at $134.59. It should be noted the rebound off that pair of lows came up shy of the previous rebound, coming to an end a few days later at $153.59.

Apple's Rough 4 Days, Trouble Ahead: Similar to the S&P 500 index, the recent Apple rally came to an abrupt end last Tuesday following a better-than-expected reading on the consumer price index.

Apple reached an intraday high of $149.97 and weakened to end the session at $145.47.

The rest of the week was ugly, with three lower highs and three lower lows resulting in three lower closes.

On Friday, the warning shot was fired when Apple made a low of $133.73, with a slight rebound and a closing price of $134.51. Interestingly, that was in the exact same area as the stock's previous lows.

Cannons Fired: On Monday, the issue. in sympathy with the index, had a slightly higher opening, but then immediately peaked at $135.20 and came under constant selling pressure.

As of 2:30 p.m. EST, the intraday low was $131.45 and Apple was attempting to remain in the $132 handle. The stock ultimately closed at $132.37. 

Apple Moving Forward: Based on the monthly charts, the next potential support for Apple comes in at its June low of $129.04.

If that monthly low is convincingly breached, the issue may be heading to levels not seen since mid-2021. That being its April low of that year (S122.49), May ($122.15), and June ($123.13).

For investors looking to buy on strength instead of weakness, a recapture of the former support which coincides with Monday’s high ($135.20) may indicate the bulls have regained the lost momentum to the upside.

The discussion on the issue from Monday can be found here:

Photo via Shutterstock.