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Today’s Trading Edge: Apple – Key Technical Resistance Pushes Price Lower and Gives Bulls a Discount

Posted by Edward Moya on Mar 19, 2014 4:41:00 PM

WWM AAPL MAR 19 2014

Apple’s lack of innovation or perhaps its perception of changing the world has kept investors away from strongly embracing bullish bets.  Since the fall of 2012, the stock has been unable to regain its form as some traders feel it’s a broken stock that cannot impress investors and that is losing the technology battle to Samsung.  Tim Cook took over as CEO two and a half years ago and for the most part he is receiving the bulk load of the blame on the stock's recent performance.  The problem is that Apple has grown tremendously and has focused on gaining more market share by providing lower end smartphones and not wowing techies with radical innovation.

In January, the stock took a big hit and broke below the 50-day Simple Moving Average (SMA) after billionaire investor Carl Icahn’s buyback proposal did not happen.  Since then, the stock has traded sideways and respected many key technical levels.  Prior to today’s FOMC event, Apple traded higher as technology experts voice their disappointment over the new Samsung Galaxy S5 and rumors surfaced that production of the iPhone 6 is beginning. 

The backbone behind this stock will likely come from the significant amount of replacement phone orders they will see over the next year, with some estimates reaching 90M in 2014 and 130M in 2015.   

Price action on the 4-year chart highlights the key respect of both the 100-day SMA providing resistance and below with the 50-day SMA yielding support.  With the overall risk-off tone triggered by the Federal Reserve easy policy stance with the abandonment of the specific unemployment goal, most stocks fell under pressure today. 

The bearish tone however may be limited as the company will benefit from many upgrades this year and they are starting to make progress in emerging markets.  The key range may be between $500 and $600 this year. 

The trade: Buy Apple at $519 with a stop loss at $499 and a take profit at $549.  The Risk/Reward Ratio is 2:3

Edward J. Moya

Technical Strategist

WorldWideMarkets Online Trading

 

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