Apple’s stock took a beating on Wednesday and left investors wondering why Apple share price has lost more than 8% the last five days. What’s even more peculiar for analysts is the fact that the Apple stock fall occurred during a time when the US stock market enjoyed an outstanding continuous of uptrend. Why does AAPL ticker keep appearing in the declining stocks’ list almost every day? Even Credit Suisse put together six reasons the stock is tanking over at BusinessInsider.
Maybe I am the only one out there who is the least surprised of Apple stock fall. I meant to predict the fall of the Apple stock when it approached the monthly R1 pivot point in the month’s beginning. Unfortunately, I neglected posting my prediction and it may sound irresponsible of me to discuss it now. Still, I truly believe there is a lesson to be learnt from Apple’s decline.
What does AAPL daily stock chart show and how could we have predicted Apple stock fall?
- First, you can’t miss pointing out the R1 pivot point I mentioned above. Pivot points are considered hidden support and resistance levels and, as always, indicators of longer time frames are much more reliable.
- Second, the stock was almost overbought according to the RSI indicator which peaked at 68 (overbought conditions mean RSI > 70).
- Third, divergence was spotted at On Balance Volume indicator. By the time Apple share price was testing R1 pivot point, the second top of OBV indicator was somewhat lower than the most recent one. Thus a divergence, since the stock price was still trending upwards.
- Fourth, there was also a Fast Stochastic divergence as shown in the chart. Apple shares were gaining but leading indicators were setting alarms on!
- Finally, Apple stock has been declining since September’s all-time high ($700).
The weekly chart of Apple stock price though shows an interesting development: penetrated declining trend line and OBV divergence. The most recent bottoms ($420 and $385) align with higher OBV lows as indicated in the graph above. Admittedly the candlestick pattern at that last bottom isn’t such a strong reversal one, so I suppose we will see another bullish reversal formation in the coming weeks, printed higher than $385; unless the support level fails. However March’s doji candlestick and April’s hammer have set up for a likely trend reversal.
Perhaps a bullish pattern will be drawn on the monthly S1 pivot point that will push Apple share price over $445 again but necessarily before May’s end. By doing so, the May’s candlestick on the monthly chart will have a close higher than the hammer’s high, which is essential for completing a reversal pattern on that time frame. Should I buy Apple stock then? The odds will certainly favor long positions. Should Apple stock resume its uptrend after the 8-month Apple stock fall, I will have this post prove my early-on prediction.