Apple, Inc AAPL gapped down about 2.4% to start Thursday’s trading session and within the first few minutes had fallen 4% off Wednesday’s closing price.
The general markets turned heavily bearish at the end of March, which technical traders may have predicted a few weeks earlier when the 50-day simple moving average (SMA) crossed below the 200-day SMA on the S&P 500, which created a death cross on the daily chart.
The S&P 500 has plunged about 16% since March 29 and Apple, often considered a market leader, has plummeted over 20% since that date.
For bullish traders, the market has been frustrating, rarely providing any relief in terms of a sustained bounce. Bearish traders have been able to hold positions confidently because, despite the months-long blood bath, there has been little to suggest the bottom is nearby.
In any market cycle there are countertrend rallies, however, and although individual stocks and the general market have not signaled the bear market is near to being over, a bounce looks imminent for Apple’s stock.
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The Apple Chart: Apple is trading in a confirmed and steep downtrend, with the most recent lower high printed on Tuesday at $156.74 and the most recent confirmed lower low formed at the $151.49 mark on Monday. On Thursday, Apple fell to a support level at $140 and bounced up from the area, which may have created the next lower low in the pattern but Friday’s candle will need to print for verification.
- Apple is likely to make a temporary bounce over the coming days because its relative strength index (RSI) is measuring in at about 31%. When a stock’s RSI reaches or falls below the 30% level it becomes oversold, which can be a buy signal for technical traders. When Apple’s RSI fell to the 31% level on Jan. 27, the stock rallied 11% over the four trading days that followed.
- If Apple closes Thursday’s trading session above the $141.70 level, the stock will print either a doji or hammer candlestick, which could indicate a bounce is in the cards for Friday. If the stock closes the day near its low-of-day price, it will print a bearish kicker candlestick, which could indicate lower prices or even a second gap down could come on Friday.
- Apple has resistance above at $143.51 and $146.41 and support below at $140 and $137.43.
