Sell at 170!
Buy at 160!?
Some call Apple Inc (NASDAQ:AAPL) a one trick pony, but could it be that concentrated operations in certain sectors is the key to the company’s enticing success on the road of becoming the first 1 trillion USD company in the world? If that’s true, Apple needs to be ready for the maturing smartphone industry and expand its operations into new sectors in order to continue its growth. Luckily for the shareholders, the company is highly liquid and able support capital intensive R&D and other expansion activities.
Lately, Apple stock price has surged amid strong earnings report and the launch of the new iPhone X, and some long-term estimates foresee the stock to trade around 180 USD with the highest estimate of 208 USD. Meanwhile, it is important not to forget that no uptrend happens without a correction.
Some expected the stock price to start a downward movement already amid Apple’s earnings announcement at the beginning of November as EPS is particularly sensitive to seasonality – historically Q4 2017 earnings have been lower than for other periods. Although this was true also for the latest earnings report, better than expected results together with the launch of the new iPhone X managed to drive the Apple Inc (NASDAQ:AAPL) share price to all-time high 174.24 USD.
Waiting for a correction
Nevertheless, it is still expected to retrace in the near future. Below are the main reasons why we should look for a correction:
- Price has reached the upper border of the long-term upward channel;
- Recently, price reached an all-time high price level;
- The current stock price has diverged from the 100 day SMA and looking from the historical perspective, it should soon retrace closer to this SMA;
- The average volume of trades is lowering indicating a lack of interest among investors and a potential reversal.
Technical reasoning
Technical analysis suggests that three scenarios of the downward movement are possible:
- A short-term retracement by -6.57% to a trendline moving parallel to the upward channel;
- -13.36% retracement in terms of the upward channel;
- -29.56% retracement back to a long term trendline within one year.
The first and the second scenarios would foresee a continuation of the medium-term bullish trend. Meanwhile, the third scenario would turn the medium-term bearish, while keeping the long-term outlook bullish.
In short, this is why I believe that a possible trade opportunity has emerged: a short market trade with TP at160.10 and SL at176.78 with a possibility to extend the TP to the lower border of the channel (around 150.00).