Asset Watch
Tuesday, August 23 2022
With Apple’s recent, furious rally erasing a large chunk of its 2022 losses (in particular following its June lows), the iPhone maker has outperformed many of its Big Tech peers. Moreover, with 23 buy ratings, four holds and one sell, Wall Street analysts’ average price target of $183.07 still implies a 6.7% upside from the August 19th close.
But with its technical backdrop less optimistic, is Apple’s megaphone pattern sounding the alarm?
The stock hasn’t made higher highs, but it has made lower lows. As a result, the broadening channel implies material downside should Apple tag the lower trendline. And with the stock perched slightly below the upper trendline, its recent ascent may have run too far, too fast.
Apple materially outperformed the S&P 500 during the pair’s recent uprising. For example, the blue line highlights the sharp uptick in the Apple/S&P 500 ratio on the right side of the chart. Moreover, prior bursts have culminated with short-term pullbacks, as mean reversion often manifests itself.
Finally, Apple’s recent strength pushed its daily RSI above 70 (overbought levels) and similar bouts of optimism often led to cooling-off periods. Therefore, while the indicator dipped below 68 on August 19th, it still may be the early innings of a short-term normalisation.
So while Apple is a best-in-class hardware and services company, could investors’ over-enthusiasm be its downfall in the days and weeks ahead?
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