Apple Shares Being Weighed Down by Yuan Devaluation

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It’s no secret that Apple is losing its market share in China, and the recent PBOC yuan devaluation is pulling Apple shares down further. Chinese smartphone manufacturer Xiaomi has overtaken Apple in terms of sales in the country while Taiwanese company Huawei is in second place.

The PBOC’s decision to set the yuan’s trading range against the dollar lower by almost 2% yesterday caused a sharp selloff among higher-yielding currencies and equities, including Apple shares. This could spur weaker demand for Chinese imports, including Apple products.

Apple Shares Outlook

With that, Apple shares could see further downside in the coming months. Apple CEO Tim Cook previously mentioned that one of their biggest sources of potential growth is in China and the central bank’s announcement would probably make it a difficult challenge for the company to spur demand in the world’s second largest economy.

A look at the longer-term time frames of Apple shares shows that the stock broke below a rising trend line visible on the daily chart. This could be a signal that a long-term reversal is underway, possibly taking price down to the next area of interest around $100/share.

The stock also broke below the long-term 200 SMA and a downward crossover from the 100 SMA might be enough confirmation that the selloff will carry on. However, stochastic is moving up from the oversold area, suggesting that sellers are exhausted and that profit-taking off the recent short positions might be seen.

In addition, RSI is on the move up as well, adding to signs that a bounce might take place soon. This could lead to a pullback to the broken trend line around the $120-125/share levels before the downtrend resumes. However, increase upside momentum might still take price up above the trend line and allow the previous trend to carry on.

To contact the reporter of the story: Samuel Rae at samuel@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.