Apple’s stock trading 50% above its SMA(500) – buy the dip?

August 13, 2020 13:00

Apple's stock trading 50% above its SMA(500) – buy the dip?

Not only have Amazon, Google and Facebook delivered strong financial results for the last quarter, but Apple has as well.

Besides strong quarterly numbers, Apple also announced a 4 to 1 split – which seems to have been an initial catalyst for a climb to new All Time Highs and a push of the market capitalization last week close to 2 trillion USD. But it is now in an extended phase with the stock trading nearly 50% above its SMA(200) – is a short-term bounce around the corner?

Apple beats expectations, on its way to a 2 trillion USD market cap

For the fiscal third quarter, the company announced a historically strong quarter, including $59.7 billion in revenue against $52.25 billion estimated and double-digit growth in its products and services segments, despite seeing its operations disrupted by the coronavirus pandemic, including store closures in the first and second quarter of 2020.

Besides that, Apple announced a profit of $11.25 billion against a $10.04 billion profit reported in the same quarter of last year and Earnings per Share (EPS) of $2.58 against $2.04.

As a result, the stock saw an acceleration of its already extended rally, pushing to new All Time Highs with the market capitalization of the company reaching close to 2 trillion USD.

But what's probably of greater interest: Apple disclosed that it now has $193.817 billion in cash, up from the second quarter, when the company reported a $192.8 billion cash pile.

While it remains to be seen whether a second wave of the Corona pandemic will hit and whether the result will be a massive economic lockdown around the globe, it seems to be clear that Apple could be in a very favourable position in regards to extending its reach in core technical areas in research and development if another set of circumstances hits in which "Cash is King".

Still, recent developments between the US and China pose a threat for a short-term correction, which could push the stock back towards, and probably even below, 400 USD (before the 4-to-1 stock split).

While Apple seems to not be directly affected by US President Trump's recent bans on U.S. transactions with the Chinese owners of the WeChat messaging app and TikTok video-sharing app, chances seem high that China will retaliate, which could result in a sharp corrective move in strongly elevated US tech shares.

How to trade #AAPL in this environment?

Technically, the current mode is very extended with the #AAPL trading nearly 50% above its SMA(200). Additionally, the RSI(14) is also trading in deep overbought territory on the daily time-frame.

In our opinion, signs of exhaustion on the upside can be seen here, even though the sequence of higher highs and lows has remained intact as long as the stock has traded above 355.00 USD.

Should we see a bounce, a potential long trigger could be found at around 395.00/398.00 USD. Should we see a deeper correction and drop below the current trend support at around 355.00 USD, a very interesting region of support and a mid-term long trigger could be found at around 325.00/330.00 USD.

In general, the forecast for #AAPL remains bullish in the long-term as long as we are trading above the SMA(200):

AAPL Chart

Source: Admiral Markets MT5 with MT5SE Add-on #AAPL CFD Daily chart (between March 19, 2019, to August 10, 2020). Accessed: August 10, 2020, at 10:00 PM GMT - Please note: Past performance is not a reliable indicator of future results, or future performance.

In 2015 the value of #AAPL decreased by 4.64%. In 2016, it increased by 10.03%. In 2017, it rose 46.11%. In 2018, it fell 6.79% and in 2019, it increased by 86.16%, meaning that after five years, it was up 164%.


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