Traders are eyeing Apple after its stock slid below a critical psychological threshold on Tuesday as shares entered a technical correction for the first time since August this month.
The shares, which failed to hold the US$180 support level last week, traded for less than $170 at various points during Tuesday’s session. Breaking through that level and holding there could presage a pullback to its October low of $165.67, according to Todd Sohn, managing director of ETF and technical strategy at Strategas Securities.
“Apple is one of the most influential stocks so it may see a bounce from here in the short-run after being oversold,” Sohn said over the phone. “But traders may still look to fade it at $180 because its trend has deteriorated so much.”
Shares of the Cupertino, California-based company have shed nearly 12% this year after closing at a record in December, erasing more than $300-billion in market value. That’s cost Apple its crown as the most valuable US company to Microsoft, as some of its Big Tech peers like Nvidia, Meta Platforms and Amazon.com keep rallying.
Apple is facing a slew of issues, including regulatory scrutiny of its App Store, declining sales in China and investor concerns over its growth prospects. Its fourth-quarter outlook also raised worries due to tepid demand for its handsets and other gadgets.
Naturally, short sellers are pouncing. Apple was the stock market’s second most profitable short position in February at $606-million in paper profits, according to data analytics firm S3 Partners.
Faltering
With Apple faltering, traders are growing concerned that technology shares broadly may face pressure in the coming months, even with Nvidia’s dominance. The iPhone maker continues to set new lows relative to the $252-billion Invesco QQQ Trust Series 1, ticker QQQ, that tracks the Nasdaq 100 Index.
That said, Birinyi Associates found that Apple’s correlation to the S&P 500 isn’t as tight as some may think. On a scale where 1 means a perfect directional relationship and 0 indicates no relationship at all, Apple clocks in at 0.65 compared with 0.69 for Nvidia and 0.36 for the average S&P stock, according to Jeff Rubin, director of research at Birinyi.
From a technical perspective, this means the US stock market can continue to churn higher as long as Apple’s stock doesn’t break its multi-year uptrend from its 2020 lows, according to Mark Newton, head of technical strategy at Fundstrat Global Advisors.
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“While this isn’t an intermediate-term concern, and there’s ample evidence that ‘Magnificent 7’ stocks can certainly carry markets higher without the aid of Apple,” Newton wrote in a note to clients. “I view all weakness in Apple over the next month as likely making this stock quite attractive.” — Jessica Menton, (c) 2024 Bloomberg LP
