Apple Bounce Attempts To Correct Sell Signals (Technical Analysis, Downgrade)

Summary:

• Warren Buffett sold half of his Apple Inc. holdings, contributing to the sell signals on the daily chart.
• Technical bounce from oversold signal, triggered short term Full Stochastic Buy Signal, but other signals remain bearish.
• Apple needs to change downtrend, improve money flow, and outperform the Index to reverse bearish sell signals shown on the chart.

Warren Buffett sold half of his Apple Inc. (NASDAQ:AAPL) holdings, so that may have helped trigger the Sell Signals on the daily chart shown below. Now we see a strong, technical bounce trying to correct those sell signals. This bounce has triggered our short term, blue, vertical line, Full Stochastic Buy Signal that you can see at the top of the chart. However, the other chart signals remain bearish, so we are changing our last SA article Buy signal to a Sell signal for this article. In addition, AAPL has lost our proprietary Buy signal and the score has dropped dramatically, approaching a Sell Signal.

The easy part of this bounce is almost over, as price quickly went up because there was no price resistance in the big gap down in price. Traders love to fill these gaps as they are considered “no-brainer” trades. However, now comes the difficult part of this bounce up. It now has to change all the bearish sell signals on this chart.

You can spot the first one easily. It is the ominous, downtrend, red arrow that we have drawn above price. The price needs to break out above that downtrend and go on to make a new high. That will require some excellent news out of AAPL and the market. We don’t see that happening in the very short term. AI, of course, will provide a big driver both for AAPL and the market, but that is not a short-term driver except for stocks like Nvidia (NVDA)

The next bearish signal, below price, is Chaikin Money Flow. As you can see, it is in the red. However, a change in direction is critical. Just as our signal at the top of the chart has created the blue line Buy Signal, we need to see money flow turn up. Without that money flowing into AAPL, it will be difficult to change the sell signals on this chart.

The signal below money flow is the MACD crossover Sell Signal. You can see that it coincided with our last, vertical, red line, Full Stochastic Sell signal and is still in place. In other words, the MACD has not yet crossed over to the upside to trigger a buy signal.

Next we have the most important performance signal for portfolio managers, telling them whether this stock is outperforming the Index. It is the price strength of AAPL relative to the SPX. The uptrend indicates that AAPL is outperforming the Index. You can see it has now dropped to just performing like the Index. AAPL typically runs with the market or better, that is why portfolio managers love it, and it is in almost every portfolio.

All signals on this chart tell us what Demand and Supply are doing to price. At the bottom of the chart is the ADX signal, and you can see Supply is dropping from a peak and Demand is improving from a bottom. However, that Supply on balance is holding price in check, and that will not change until we see Demand on balance taking price to a new high. AAPL is not there yet, but still struggling with this bearish move down caused by Supply on balance. The bounce is just a technical one so far, as traders move price up from deeply oversold, along with buyers on weakness.

Traders are trading the changes, and investors are using trends to buy, hold or sell AAPL. We do our due diligence by checking the Seeking Alpha ratings. SA shows a Hold rating for both SA analysts and the SA Quant system. As expected, Wall St. analysts have it as a Buy. The SA Quant ratings give good grades to AAPL for Revisions, Momentum, and Profitability. However, the poor ratings for both Valuation and Growth are a warning that pullbacks in price can happen to AAPL. A fundamental investor like Warren Buffett knows this and has a fundamental sell discipline. His sale reduced his total AAPL risk. However, AAPL is still his largest position.

Here is the daily chart showing all these signals in living color. We supply this live chart throughout the day to spot the changes. Investors are only interested in trend changes. AAPL needs to change the downtrend and start outperforming the Index again.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in AAPL over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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