ChartWatch: Apple Must Fight A Lot of Sellers

Apple (NASDAQ: AAPL) has had a tough few months. And the next few could be even tougher.

The stock had been down by as much as 28% after peaking at $701 in September. Though the shares rallied by 10% over the last few sessions, they remain well below the previous high.

More disturbingly, AAPL will begin to encounter three areas of strong selling pressure.

First, AAPL bulls must fight sellers near the 50-day moving average (orange). This should be the easiest selling zone to overcome. And buyers will want to do that soon because they’ll need all the momentum they can collect to trek past the next two resistance spots.

After taking back the 50-day moving average, buyers must contend with the 200-day moving average (black). This is a level where institutional investors often make transactions.

Buyers have been unable to regain the 200-day moving average since losing it in November, suggesting that “big money” is moving out. This moving average acted as resistance in late November after buyers lost it earlier that month.

This chart shows the price of AAPL shares along with important resistance levels to monitor.

The third area of resistance is around $619 (upper blue lines). ChartWatch initially noted this level of resistance (along with $510 as support) in a July report.

The $619 level has proven to be a difficult nut to crack in the past. Though AAPL rose above that price last year, buyers struggled to hold it.

Apple is an inexpensive stock, despite a $550 price tag. In fact, I’ve argued that it’s severely undervalued and I expect it to rise to $600 in short order. However, the three resistance levels mentioned above will weigh on the shares. Unless AAPL can exceed analyst expectations in their earnings announcement later this month, I fear the stock will have limited upside over the next several months and must stay above $510 (lower blue lines) or risk another down leg.

Equities mentioned in this article: AAPL

Positions held in companies mentioned above: none


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