Apple Stock Weakness Means Its Time To Be Cautious ($AAPL)

Apple, like other US and Global equities, has had a nice run off the February lows. However, in my research I uncovered three charts that suggest the bias has shifted back toward the downside across multiple timeframes for Apple stock (AAPL). So today let’s take a look at Apple stock weakness and why it may persist for a bit.

The daily chart of Apple (AAPL) provides a tactical view of the failed breakout currently occurring in the stock on an absolute basis. Last week, prices made new marginal highs and attempted to break above the downtrend line from the July highs, but quickly reversed as momentum diverged negatively.

This confluence of resistance at the April 4th highs, 61.8% retracement of the Nov-Jan decline, and downtrend line from the July highs is proving to be an issue for Apple stock. And it should remain on your radar.

As long as prices remain below 111.81 on a daily closing basis, the bias remains to the downside. From failed moves generally come fast moves in the opposite direction, and that’s exactly what I’m looking for in Apple. So be on the lookout for further Apple stock weakness.

Apple Stock Chart (AAPL)Image 1 04-30-2016In addition to its issues on an absolute basis, Apple is currently running into overhead supply relative to both the S&P 500 and Nasdaq 100.

The chart below of AAPL / SPX represents the relationship of Apple stock price relative to the S&P 500 Index.Image 2 04-30-2016

The downward sloping 200 day moving average suggests that the long-term trend in this ratio remains lower. The fact that momentum remains in a bearish range and prices are testing a key resistance level both indicate that the bias remains to the downside across the short, intermediate, and long-term. As long as this ratio remains below the downtrend line from the early 2015 highs and prior support level near 0.054 on a daily closing basis, the weight of evidence suggests that shares of Apple (AAPL) will continue to struggle relative to the S&P 500.

The conditions discussed above are also true in the ratio of AAPL / NDX, which represents the relationship of Apple stock price relative to the Nasdaq 100 Index. The levels are slightly different, but overall the conditions are almost identical.Image 3 04-30-2016

The Bottom Line: The current weight of evidence suggests that the bias has shifted to the downside in Apple on an absolute and relative basis.

If you’re looking to be aggressive on the short side, the risk is well-defined, or you could simply utilize this information to shift your bias from bullish to a more neutral stance on Apple stock.

What would be most constructive for Apple on an absolute and relative basis is a correction through time. If prices can continue to consolidate over the next several weeks and months, then AAPL can work through the overhead supply in a healthy way before continuing higher. I think that is the lower probability outcome, but I’m staying open minded and will adjust my view as the weight of evidence changes.

As always, if you have any questions feel free to reach out to me on Twitter and I’ll get back to you as soon as I can. @BruniCharting

The author does not have a position in any of mentioned securities at the time of publication.  Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.

This post originally appeared on SeeItMarket on 4/18/2016.