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Apple on the brink

December 16, 2022

This is all about charts. Fundamentals would just be a distraction. There is a pattern on this chart which looks like a head and shoulders top. It would be completed by the price falling decisively below the red line. It is looking increasingly likely to happen which will have negative implications for the Apple share price, US indices and many ETFs which have large holdings in Apple. My favourite ETF, QQQ3, could also be affected so I would hold fire on buying any of those until we see what happens to this chart.

The problem with a chart like this is that if a breakdown is confirmed the implication is that the shares are going to fall a long way. It would be a bruising development for the whole technology sector and suggests that what may be coming is some degree of rotation away from technology shares to other sectors such as health care. Chinese shares may also be less affected by a breakdown in Apple and able to plot their own path as the Chinese economy comes out of lockdown.

The Coppock indicator for Apple has been falling since January 2021 but has only recently become negative. If the shares break down the implication is that the Coppock will become significantly negative before it turns higher.

What could be going wrong at Apple? I don’t know but if everything was hunky dory it is unlikely that the chart would look like this. Apple investors will be awaiting the next quarterly results, due on 26 January, with some trepidation.

Strategy

This market is not out of the woods yet. There are some chinks of light amidst the gloom like health care shares and Chinese technology shares but the overall market is still struggling and with stocks like Tesla and Apple under pressure there could still be more downside to come. Just sticking with the megacaps Amazon and Alphabet are still in full blown decline. It’s still a scary market albeit with pockets of strength.

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