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Apple's Greatness Problem Shows Up on the Chart

As the iPhone maker proves a victim of its own success, let's see why two levels are key to watch now.
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Shares of Apple (AAPL) have lost about 9% of their value since mid-December. Because Apple has the largest market capitalization of any U.S. stock, its recent poor performance is weighing on the major indexes.

The good news for investors is that Apple is receiving help, in the form of support at its 200-day moving average (red line). On Monday, Apple vaulted after testing that indicator, which rests near $180.

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Charts by TradingView

Apple hasn't closed below its 200-day moving average since October. The stock hasn't spent an extended period below that indicator since January of last year.

On the bearish side, Apple has formed a double top (shaded yellow) over the past six months. Since the stock has already broken down, I consider this a relatively minor concern.

If Apple eventually falls below its 200-day moving average, where is the next level of support? A bullish trendline that has been intact since the start of last year (black dotted line) comes in at about $176.

As long as Apple can remain above its 200-day moving average, the stock's bullish trend will remain intact. If Apple gets below $176, it could spell bad news, both for the stock and the major indexes.

Those indexes are in much better shape than Apple. For example, the S&P 500 is far above its 200-day moving average. A double-top is visible (circled), but its small size suggests it is of little consequence.

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Charts by TradingView

Analysts are falling out of love with Apple. Last week, Piper Sandler lowered its rating for Apple from overweight to neutral. Piper analyst Harsh Kumar lowered his price target from $220 to $205.

Barclays also downgraded the stock, from neutral to underweight, and lowered its price target to $160. This weekend, Jeffries analyst Edison Lee noted a sharp decline in iPhone sales in China.

In a way, Apple is a victim of its own success. If you already own an iPhone 14, or have recently purchased an iPad or Macbook, there is little incentive to upgrade right now.

Add in the lasting effects of the worst bout of inflation in over 40 years, and you have a recipe for a slowdown in iPhone sales. Apple is scheduled to report earnings after the close on Feb. 1.

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At the time of publication, Ponsi is long AAPL.