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Apple Inc. (NASDAQ:AAPL) stock is solid for the long term, its vulnerability to the U.S.-China trade war could harm the overall stock market

Apple Inc. (NASDAQ:AAPL) stock is solid for the long term, its vulnerability to the U.S.-China trade war could harm the overall stock market

Morgan Stanley analyst Katy Huberty delivered mixed messages regarding Apple’s stock this week.

With Apple’s stock closing at $178 on Thursday, she downgraded the price target from $240 to $231.

She did not change her revenue or profit estimate though and then noted that AAPL could trade as low as $160 in the near-term.

CONFUSION REIGNS IN APPLE’S STOCK

These contradictory signals reflect the market’s confusion as far as what to do with Apple’s stock in the near term even as its long-term health seems robust.

Investors are terrified that tariffs will be slapped on Apple goods. That could mean lower iPhone sales.

It might also cause cause problems since the tech giant benefits from lower Chinese manufacturing costs.

On the other hand, all is not lost. As Huberty points out:

“In the event Apple is unsuccessful in persuading the [U.S. trade representative] to remove key categories from the final list of taxed goods, Apple’s representative will have to submit a request for each particular product they’d like to be excluded and provide a rationale as to why it should be excluded from the tariff list.”

In that case, there might not be any impact.

NO REASON TO PANIC

Apple’s stock is 24% off its all-time high due to these concerns. Yet AAPL historically gets shoved around on news like this only to come roaring back a few months later on a blockbuster earnings report.

The trade war is also going to be finite. It won’t last forever, so this is an opportunity to grab the stock at lower prices. Indeed, as Huberty adds:

“The situation remains extremely fluid and we admit that quantifying the overall impact of geopolitical tensions on Apple is difficult given the unknowns around timing, demand impact, retaliatory measures, exclusions, etc.”

BEWARE: AS APPLE GOES, SO GOES THE STOCK MARKET

There are adjunct concerns regarding AAPL and the overall stock market. The S&P 500 is market cap-weighted, meaning the more valuable a company is, the more of an effect it has on the S&P 500 – the index most commonly used as a proxy for the entire stock market.

AAPL is the second most valuable company in the stock market, behind only Microsoft.

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

The projected upper bound is: 187.97.

The projected lower bound is: 168.30.

The projected closing price is: 178.14.

Candlesticks

A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.

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 15.7450. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a buy 13 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 32.35. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 17 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 -94. This is not a topping or bottoming area. The last signal was a buy 0 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 23 period(s) ago.

Rex Takasugi – TD Profile

APPLE INC closed up 0.920 at 178.300. Volume was 27% below average (neutral) and Bollinger Bands were 99% wider than normal.

Open High Low Close Volume___
177.950 179.230 176.670 178.300 21,218,412

Technical Outlook
Short Term: Oversold
Intermediate Term: Bearish
Long Term: Bearish

Moving Averages: 10-period 50-period 200-period
Close: 182.41 195.22 191.40
Volatility: 25 32 40
Volume: 30,052,830 30,216,930 34,570,004

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% below its 200-period moving average and is in an downward 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 out of AAPL.O (mildly bearish). Our trend forecasting oscillators are currently bearish on AAPL.O and have had this outlook for the last 13 periods.

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