Is The Bottom In For Apple Stock? Here's Why Patience Is Key

Apple, Inc AAPL was trading down about 1.5% in the premarket session Wednesday, but within the first 30 minutes of trading the stock erased its losses. 

The S&P 500, which holds a 6.2% weighting of Apple, entered into an official bear market on June 13 after falling over 20% from its Jan. 4 all-time high of $4,818.62.

A death cross, where the 50-day simple moving average (SMA) crossed below the 200-day SMA, occurred on the SPY ETF’s chart on March 15, predicting the bear cycle.

Initially, Apple held up slightly better before a death cross took place on the stock’s chart on June 2. Since then, Apple declined 14.7% to reach a low of $129.04 on June 16 before rebounding about 5% between Friday and Tuesday.

In every bear cycle there are bullish rallies, which can be strong and volatile as fear of missing out (FOMO) and short covering take place. The moves to the upside can trap retail investors who believe the bear cycle is coming to an end and take positions believing they’ve entered near the bottom.

Retail traders who purchase call options are usually the hardest hit, because premiums increase quickly during rallies and decrease even faster when a stock declines.

For many, practicing patience during bearish cycles is the best and most difficult thing to do. To combat FOMO, some investors may choose to average into positions slowly.

For Apple, the trend indicates lower prices will come, at least in the mid-term, unless the stock can print some meaningful reversal signals on larger time frames. In the short-term, however, a larger bounce could be on the horizon

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The Apple Chart: Apple is trading in a downtrend on the daily chart, with the most recent lower high printed on June 15 at $137.34 and the most recent lower low formed at the $129.04 mark the following day. On Tuesday, Apple attempted to negate the downtrend but failed, wicking from the high-of-day at $137.06, just short of the most recent lower high.

• On Wednesday, Apple was printing an inside bar pattern, with all of the price action taking place within Tuesday’s range. The inside bar leans bullish in this case, because Apple was trading higher before forming the pattern and because Wednesday’s price action was taking place in the upper range of Tuesday’s mother bar.
• Apple is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The eight-day EMA has been acting as heavy resistance for much of the last few months and bullish traders would like to see Apple regain the level as support to feel more confident going forward.
• Apple has resistance above at $137.33 and $140 and support below at $132.93 and $128.32.

See Also: How To Watch YouTube Videos On Apple Watch For Free

Photo courtesy of Apple.