Apple, Inc AAPL gapped down over 2% on Wednesday to start the trading day and continued to decline once the market opened.
A report on Tuesday indicated demand for Apple’s new iPhone line-up has decreased. As a result, the big-tech company has pulled back on its plans to ramp up production.
The news sparked fears a recession could be on the horizon because it suggests consumers are finding they have less disposable income to spend on new technology.
From a technical standpoint, Apple has been trading in a falling channel pattern since Aug. 17, when the stock attempted to reach back up to the Jan. 3 all-time high of $182.94. The pattern is bearish for the short term, but can be bullish down the road.
- For bearish traders, the “trend is your friend” (until it’s not) and the stock is likely to continue downwards. Aggressive traders may decide to short the stock at the upper trendline and exit the trade at the lower trendline.
- Bullish traders will want to watch for an upward break from the upper descending trendline, on high volume, for an entry. When a stock breaks up from a descending channel, it’s a powerful reversal signal and indicates a rally is likely in the cards.
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The Apple Chart: Within the falling channel pattern, Apple has been trading in a downtrend. The most recent lower high was formed on Monday at $154.72 and the most recent confirmed lower low was printed at the $148.56 mark on Sept. 23.
- On Wednesday, Apple declined under that lower low, but hasn’t yet indicated the next low within the pattern has occurred. Bullish traders will be watching for Apple to eventually print a reversal candlestick, such as a doji or hammer candlestick, to indicate a bounce is in the cards.
- If Apple continues to trade lower over the next few days, the reversal may come if the stock tests the lower descending trendline of the channel. When the stock has fallen to that area over recent weeks, the trendline has acted as support.
- Conservative bearish traders may choose to wait until Apple bounces up to form its next lower high before entering a short position. An upper gap that now exists between $148.37 and $149.95 maybe act as the bearish turning point on the next bounce.
- Apple has resistance above at $146.41 and $150 and support below at $143.51 and $139.96.
See Also: Is iPhone Demand Really Slowing Down? Apple Analyst Says This Data Point Proves Otherwise
