Apple Inc. (NASDAQ:AAPL) decline fueled by slowing iPhone sales
Apple suffered one of the hardest hits among the FAANG grouping, dropping 38% from its peak last October to a low of $141 just after the new year. The decline was fueled by slowing iPhone sales, the ongoing contraction in Chinese consumer demand, and concerns over the simmering U.S.-China trade tensions. As 2018 ended, each of those factors began to show signs of resolution.
First, the slowdown in iPhone sales was attributable to a general maturation of the smartphone market. Believe it or not smartphones have been around for 10 years now; the replacement cycle is starting to lengthen as improvements appear in smaller increments and users keep their devices longer rather than snap up every new model with every new bell.
Second, while China’s economy is undoubtedly slowing Apple is showing signs that it can compensate for a smaller market there – and for the longer device replacement cycle – by expanding its services sector. iPhones have brought Apple a loyal customer base, which can now be leveraged to increase revenue from the App Store, Apple Music and other services. The most recent quarterly earnings showed that this is already happening.
And finally, as we’ve all seen in the news, U.S. President Donald Trump and Chinese President Xi Jinping both have expressed confidence in the progress of trade negotiations as their diplomatic teams continue to talk. Their confidence has had at least one salutary effect: Trump has delayed the threatened imposition of retaliatory tariffs on Chinese trade.
That’s the news. Wall Street analysts are starting to take it all into account. From Wedbush, Daniel Ives predicted that Apple’s new streaming service will expand the company’s presence in the gaming and video content segments. Gaming, especially, is a profit engine, and likely will power the services division’s continued growth. Ives sees Apple streaming, which is scheduled to be unveiled on March 25 and expected to go live in the fall, bringing in up to 100 million subscribers in the first few years. He gives AAPL an optimistic $200 price target, suggesting a 7% potential upside for the stock.
In Apple’s most recent analyst review, Timothy Arcuri of UBS looked at smartphone data released by the Chinese government. While he sees a steep decline in iPhone sales, he described is as “already baked into expectations.” He’s confident that AAPL remains a buy option, although his $185 price target may be out of date as AAPL closed above that on March 15.
Merrill Lynch’s Wamsi Mohan sets out a more bullish case for Apple shares. He upgraded the stock to a buy rating, and his $210 target suggests a potential upside of 12%. Among the strengths he enumerates for Apple: a consistently loyal user base; competitive products in the higher price ranges; the acceleration in the services division; and the stability of the supply chain. It’s a solid foundation for future growth.
Apple’s recent surge in the markets – the stock is up 32% since it’s low point in January – seems to have taken analysts by surprise. AAPL shares have powered straight through the average price target, and at $186 now stand $7 above that level. Look for analysts to reevaluate this stock soon, considering last week’s gains. Right now, AAPL holds a moderate buy from the consensus rating, with 17 buys and 13 holds. It’s a stock in the process of turning around.
Overall, the bias in prices is: Upwards.
Note: this chart shows extraordinary price action to the upside.
By the way, prices are vulnerable to a correction towards 175.98.
The projected upper bound is: 196.41.
The projected lower bound is: 181.46.
The projected closing price is: 188.94.
A big white candle occurred. This is generally considered bullish, as prices closed significantly higher than they opened. If the candle appears when prices are “low,” it may be the first sign of a bottom. If it occurs when prices are rebounding off of a support area (e.g., a moving average, trendline, or retracement level), the long white candle adds credibility to the support. Similarly, if the candle appears during a breakout above a resistance area, the long white candle adds credibility to the breakout.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 94.5224. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 25 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 77.37. This is where it usually tops. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 49 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 147.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 9 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 4 period(s) ago.
Rex Takasugi – TD Profile
APPLE INC closed up 1.900 at 188.020. Volume was 29% below average (neutral) and Bollinger Bands were 32% narrower than normal.
Open High Low Close Volume___
185.800 188.390 185.790 188.020 26,219,832
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 179.49 166.92 190.67
Volatility: 23 30 38
Volume: 27,369,692 29,986,146 33,029,440
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
APPLE INC is currently 1.4% below its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of AAPL.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 35 periods. Our momentum oscillator is currently indicating that AAPL.O is currently in an overbought condition.
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