Apple shares appear to have competed a complex head and shoulders formation on its daily time frame, confirming that the uptrend is over. Price is currently testing the neckline at $94.00 after previously finding resistance at the 61.8% Fib and 200 SMA.
The 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. A break below these recent lows could push it lower to the next floor at $70. However, stochastic is indicating oversold conditions so bearish pressure might be fading while RSI is also in the oversold area.
A bounce could lead to another quick retracement, possibly to the 100 SMA around $100-103 just to fill the gap. A descending trend line can be drawn to connect the latest highs of price action since August last year.
Weak earnings figures weighed on Apple shares last week, as the company faced a slowdown in iPhone sales and an even weaker outlook. The company was able to sell 51.2 million iPhones in the March quarter, significantly lower than the 61.2 million in the same quarter a year ago. Sales of this unit accounted for 65% of the company’s revenue, with other products such as the iWatch unable to make up for the decline.
Earnings came in at $1.90 per share, lower than analysts’ estimates at $2 per share. Revenue came in at $50.56 billion, shy of the $51.97 billion estimate, while profits slid from $13.57 billion a year ago to $10.52 billion in the March quarter.
While executives are hopeful that they can tap into other revenue sources such as iTunes or their streaming service to produce better profitability later on, current quarter earnings could show more signs of weakness as its market in China remains feeble. Near-term resistance is located at the psychological $100 barrier while support could be found at $75.
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