Apple Holds Value Level and Has Positive Weekly Chart

Apple Inc. (AAPL) stock is rebounding within bear market territory, and this notion gained technical credence last week as my semiannual pivot at $168.72 held on weakness and the weekly stock chart was upgraded to positive. Apple shares closed last week at $170.41, up 8% so far in 2019 and in bull market territory at 20% above the Jan. 3 low at $142.00. However, the stock is still in bear market territory at 27% below its all-time intraday high of $233.47 set on Oct. 3, the day the Dow Jones Industrial Average peaked at 26,951.81.

Apple thus led the Dow 30 higher, but then the warnings came. The most alarming was the news that iPhone sales were declining. In addition, Apple decided that it would no longer offer specific sales numbers by iPhone unit and then lowered expectations.

The bulls then began to like the stock on valuation. Its P/E ratio is 14.01 with a dividend yield of 1.71% according to Macrotrends. In my opinion, Apple stock would be cheap if its P/E ratio fell to 12.00 and if the tech giant increased its dividend to above 3.00% so the stock could be considered one of the "Dogs of the Dow."

Therefore, the daily and weekly charts make the difference.

The daily chart for Apple

The daily chart for Apple shows the formation of a "death cross" on Dec. 20, when the 50-day simple moving average fell below the 200-day simple moving average, indicating that lower prices would follow. This warning was in play at the Jan. 3 low of $142.00.

The 2018 close of $157.74 on Dec. 31 was input to my proprietary analytics and resulted in three horizontal lines. My semiannual pivot is $168.72, with my annual and quarterly risky levels at $182.85 and $218.66, respectively. The Jan. 31 close of $166.44 resulted in my risky level for February at $194.65. My weekly value level is $147.20. Notice how my semiannual pivot at $168.72 held at the low of Friday, Feb. 8.

The weekly chart for Apple

The weekly chart for Apple is positive, with the stock above its five-week modified moving average of $164.97 and above its 200-week simple moving average, or "reversion to the mean," at $142.75. When the stock traded as low as $142.00 on Jan. 3, it nearly tested its "reversion to the mean" at $141.85, close enough to consider a buying opportunity.

The 12 x 3 x 3 weekly slow stochastic reading rose to 25.62 last week, up from 17.79 on Feb. 1 and rising above the oversold threshold of 20.00. Another reason to buy at the low was that the stochastic reading was 7.54, well below 10.00, which is my indication that a stock is "too cheap to ignore."

Trading Strategy: Buy weakness to my semiannual pivot at $168.72 and my weekly value level at $147.20, and reduce holdings on strength to my annual, monthly and quarterly risky levels at $182.85, $194.65 and $218.66, respectively.

Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.