Apple Inc. (NASDAQ:AAPL) still has a hardware problem but investors don’t seem to care

Apple Inc. (NASDAQ:AAPL) still has a hardware problem but investors don’t seem to care

Apple Inc. (NASDAQ:AAPL) still has a hardware problem but investors don’t seem to care

For a brief time late last year, it looked like the market was coming around to my long-held skepticism toward Apple (NASDAQ:AAPL). The shares fell sharply in the last three months of 2018. At the lows, AAPL stock had lost over one-third of its value.

The fear was slowing iPhone sales — long a large part of the bear case on AAPL. Egged on by the plunging broader market, the Apple stock price unsurprisingly fell, losing almost 24% in the final two months of the year while the Nasdaq Composite index shed 9.4%.

So far in 2019, however, investors seem much less worried. AAPL has climbed back, rising 29%. But the problems still are there and, in fact, they’re getting worse. iPhone sales look like they’re stalling out, which puts pressure on the services business. The news on both fronts hasn’t been great of late yet Apple stock keeps climbing. Once again, I believe it’s gone too far.

Hardware Problems for Apple Stock

The core part of the bear case for Apple — and the reason AAPL stock, even at the highs, traded at relatively low earnings multiples — is that iPhone sales growth is stalling out, and could get worse. Replacement cycles are lengthening. Incremental improvements are less impressive.

Apple is trying to improve the camera in its next line, for instance, but that’s not of enormous interest to many current iPhone owners. With unit prices around $1,000, Apple can’t do much on the pricing front, either.

And the iPhone still drives more than 60% of revenue even with iPhone sales dropping 15% in fiscal Q1. If those sales stay negative, Apple’s growth is going to grind to a halt.

That problem doesn’t seem to be getting better. Analyst firm OTR Global just cut its estimates for fiscal Q2 and fiscal Q3. Credit Suisse (NYSE:CS) is projecting a 12% decline this year. Another smaller outfit is projecting weakness as well.

That’s the revenue problem. Meanwhile, Apple surprisingly settled with Qualcomm(NASDAQ:QCOM) — which will hit the iPhone on the cost side as well, reportedly to the tune of $9 per unit. With Intel (NASDAQ:INTC) unable to deliver its 5G modem on time, Apple really had no choice.

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 189.47.

The projected upper bound is: 210.93.

The projected lower bound is: 199.48.

The projected closing price is: 205.20.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 6 white candles and 4 black candles for a net of 2 white candles. During the past 50 bars, there have been 29 white candles and 21 black candles for a net of 8 white candles.

Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.

Momentum Indicators

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.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 95.6897. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a sell 6 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 77.45. 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 sell 19 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 143.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a sell 6 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 4 period(s) ago.

Rex Takasugi – TD Profile

APPLE INC closed up 0.670 at 204.530. Volume was 41% below average (neutral) and Bollinger Bands were 8% narrower than normal.

Open High Low Close Volume___
202.830 204.940 202.340 204.530 19,439,544

Technical Outlook
Short Term: Overbought
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period 50-period 200-period
Close: 200.80 184.72 191.50
Volatility: 15 20 38
Volume: 24,778,180 26,451,956 33,511,896

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.

Summary

APPLE INC is currently 6.8% above its 200-period moving average and is in an upward trend. Volatility is extremely low when compared to the average volatility over the last 10 periods. There is a good possibility that there will be an increase in volatility along with sharp price fluctuations in the near future. Our volume indicators reflect moderate flows of volume into AAPL.O (mildly bullish). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 59 periods. Our momentum oscillator is currently indicating that AAPL.O is currently in an overbought condition.

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