(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Before Apple (AAPL) reported earnings, I reviewed the tea leaves in the chart guessing that the stock was getting ready to make its next sprint higher despite what looked like increasing distribution in the stock. I assumed the break upward would occur after a post-earnings “disappointment” and swoon. Instead, traders did not wait for earnings to punch the stock through support levels and then bounce it right back up. The action prompted me to guess that the sprint higher was already underway ahead of earnings. By the time the post earnings reaction came, AAPL closed 2.4% higher (April 21) and has been selling off ever since – surprising, even with the stock market looking increasingly bearish overall.
My biggest surprise came with the mostly negative reaction to what appeared to be another blockbuster technology splash by Apple last week…
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*Chart created using TeleChart
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Presumably, it would take a large amount of misinterpretation to account fully for AAPL’s recent underperformance relative to the NASDAQ last week…
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…It is as if investors and traders are signaling some deep skepticism in future earnings estimates. Indeed, Bloomberg recently reported that valuations in technology stocks last sunk to these levels in 1998 – Apple is in good company…
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This sobering context suggests that instead of Apple suffering some company-specific malaise of under-appreciation, Apple is trapped in a larger, bearish mosaic. The upcoming test of support and the 200 DMA could be this sell-off’s most watched moment with large implications for the (near-term) direction of technology stocks.
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha. Click here to read the entire piece.)
Full disclosure: long AAPL call, long CSCO, short AMZN