Apple shares are forming a head and shoulders reversal pattern on its daily time frame, indicating that a long-term downtrend might be in the works. Price is still hovering above the neckline around $100-102/share and a breakdown could confirm the potential selloff.
Stochastic is on the move up while RSI is on middle ground, both indicating that buyers are still in control of price action and that Apple shares could stay afloat. A turn from the overbought regions could draw more sellers in and cause a breakdown from the neckline.
Meanwhile, the 100 SMA is starting to cross below the longer-term 200 SMA, indicating that selling pressure is building up. Should this carry on, price could head to the longer-term support area and trend line at $90/share or much lower.
Apple Shares Outlook
Apple could end up paying around $860 million in charges after losing its patent lawsuit against the University of Wisconsin-Madison. A US court found that the company used technology owned by the university in chips found in its devices.
In addition, weaker numbers are expected for Apple earnings data coming out later in the month, as the yuan devaluation in China probably resulted to weaker sales in one of their largest markets. Recent trade numbers from the country revealed a sharp 17.7% tumble in imports, reflecting significantly weaker demand from China.
Nonetheless, the company has also reported that its early sales numbers for the iPhone 6S units have exceeded forecasts once more, possibly adding to revenue for Q3 2015. The company is set to release its earnings report by October 27, with stronger than expected data likely to yield more gains for Apple shares.
According to Max Wolff, chief economist at Manhattan Venture Partners, Apple shares tend to lose ground ahead of the company’s earnings release but it’s still possible to see a recovery afterwards. “We tend to see a little bit of a trail down in Apple going into earnings, we tend to see people be worried. And then we see the shares strengthen after the earnings are reported,” he said.
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