Apple has formed a massive double-top pattern. Here’s why a failing AAPL could mark the beginning of the end this market malaise.
By ED PONSI
It’s time to wrap up what has been a tough year for the markets. What does 2023 hold in store? The answer may come down to one stock.
Sifting through the damage of 2022, some of the hardest hit stocks once led the charge higher. Here are some year-to-date figures:
Alphabet (GOOGL) is down 38.7%
Amazon (AMZN) has lost 49.39%
Meta Platforms (META) fell by 64.08%
Tesla (TSLA) is down 65.55%
As bad as those numbers are, they could be worse. Apple (AAPL) has lost 26.7% for the year. That’s a better performance than many of its large-cap peers, yet I’d argue that the Cupertino-based tech giant has a worse chart than any of the names listed above.
Apple has formed a massive double-top pattern. This bearish formation has been under construction for 15 months. Using an old-school measuring technique, the pattern suggests that Apple could fall as low as $90. Earlier this week, the stock hit an 18-month low.
Charts by TradeStation
Apple is arguably the most important stock in the market. It’s currently the only U.S. name with a market cap above $2 trillion. It’s the largest component of the S&P 500 and the Nasdaq Composite, the two most widely followed U.S. stock indexes.
I’m long this stock, so it pains me to say this, but maybe a cheaper Apple is exactly what this market needs. We’ve just spent an entire year grinding lower. I don’t want to spend 2023 watching this market slowly bleed the way it did in 2022.
I’m not rooting for Apple to fail, but I am rooting for the end of the bear market in 2023.
One by one, we’ve watched big names like Amazon and Tesla fall, but there has been no capitulation. There’s been no definitive point where the bulls have surrendered, and often that’s what is needed to put in a bottom.
According to this weekly chart of the CBOE Volatility Index, fear is low. Market bottoms occur when the Volatility Index shoots higher, as it did in the early days of the pandemic.
Earlier this week, two popular Apple blogs, Macworld and MacRumors, indicated that the company was seriously considering price cuts for future models because of a lack of buyers for the iPhone 14 Plus. The Macworld article claims that sales of the new model are below Apple’s lowest estimates.
Apple is scheduled to report earnings after the close on Jan. 26. The Federal Open Market Committee should raise the Fed funds rate on Feb. 1. We’re about a month away from finding out if Apple will fall like so many of its peers.
If it does, there will be a silver lining. It could mark the beginning of the end of this period of market malaise.
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