Apple has been underperforming its peers since its last earnings report. While its price decline has been moderate, AAPL recently has been testing major support more than resistance in what could be a sign of coming weakness.
The daily chart below shows a potential bearish " flag " pattern in the shares, indicated by the sloping orange lines. The flag is a current bullish price channel that would turn into a bearish pattern if AAPL breaks the low of the channel, which today is at the $379 area.
The red vertical line indicates a downside potential to the $366 area if this pattern becomes active. This coincides with the current position of the 200-day moving average, shown in blue.
If the stock does make it back down to that level, it would be the third such test of that moving average in the last three months. As we have seen many times, support that is consistently retested can sometimes weaken and break.
If that were to happen with Apple, we could see further, and possibly substantial, price declines.
The pattern would be completely voided if price were to break through the top of the pattern, last at the $385 area. AAPL is trading at $381.01 this afternoon, up fractionally on the day.
(Chart data provided by Thomson Reuters)
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