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 Wednesday 04 May 2016

PM Bulletin: Apple update

 

 

I last looked at Apple (AAPL) just ahead of its earnings release last week. As a recap the one-time market darling reported quarterly earnings and revenues that missed analysts’ expectations. Earnings came in at $1.90 per share against an anticipated $2.00, while revenue was $50.56 billion versus $51.97 billion. Not only that, but this revenue number was down 13% for the same quarter last year – the first year-on-year decline in quarterly sales since 2003. As can be seen in the chart below, investors took the news badly – despite the announcement of a 10% dividend increase.




I’ve left on the Fibonacci Retracement and Andrews’ Pitchfork to see how the stock is playing out from a technical viewpoint. The starting point for the Fib is the high from July last year – just ahead of the global sell-off triggered by the melt-down in the Chinese stock market and the subsequent measures taken by the authorities as they attempted to stem the losses. The Fib’s low lines up with the point where Apple turned higher at the end of January this year. As we can see, Apple retraced 50% of that sell-off before turning lower once again. It ceded some ground ahead of the earnings release and slumped sharply after the results came out. It’s interesting that the sell-off stopped dead within a cent of the 28th January low. There’s been a modest bounce from here as Apple’s CEO Tim Cook toured the studios and attempted to reassure investors. On top of this many fund managers have rushed out to reaffirm their price targets of $120-plus. So we could get a bit more of a bounce from here in the short-term.

But the area around $95.50-$96 is important when viewed on a longer-term chart. It currently represents support from a tend-line that takes in the low hit in June 2013. If Apple struggles to put in a decent rally over the next week or so from current levels, then it could have further to fall. It’s worth remembering that money managers can be forced to sell heavily-owned stocks such as Apple once the stock becomes worth more than a certain percentage (depending on that particular fund’s rules) of the managers’ overall portfolio. So, after a long run-up, Apple can get sold off for no apparent reason. Of course, on the flip-side, the kind of sell-off that we’ve seen recently can offer scope for further purchases. However, these won’t be forthcoming if money managers believe that the stock is no longer in an up-trend.


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Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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