Apple Stock Near 3-Month Low Despite Strong Earnings

Apple Inc. (AAPL) shares sold off more than 6% on Thursday evening, dropping toward $207, after the tech giant beat fiscal fourth quarter profit and revenue estimates while guiding down first quarter margins and revenues. More importantly, the company advised that it would no longer provide quarterly sales data on the iPhone and other products, forcing Wall Street analysts and other market players to rely upon supply chain metrics and the rumor mill to gauge results.

The company will now outline broad-brush quarterly cost of sales and revenue data while adopting a new FASB standard. Still, it was an odd decision, given the market's obsession with each iPhone version and the huge media attention given to company marketing events. The stock universe lives and dies by the success or failure of new products, but Apple is telling the trading community to rely on second-hand and often misleading information. This has the potential to backfire badly on the tech giant in coming quarters.

China sales fired on all cylinders during the fiscal fourth quarter, relieving anxiety about the impact of the escalating trade war. However, the company noted sales pressure in other emerging markets, reflecting the dampening effect of the surging U.S. dollar, which is directly related to those fiscal policies. In addition, President Trump has threatened to expand tariffs into many tech components in 2019, potentially raising production costs while reducing sales.

The stock cleared resistance at the 1991 high near $2.60 in 1999 and took off in a strong uptrend that topped out above $5.00 in 2000. It then sold off with the broad tech universe, dropping to a five-year low at 91 cents in 2003. That marked a historic buying opportunity, ahead of a powerful advance that reached the upper $20s in 2007. The subsequent slide accelerated during the 2008 economic collapse but held support on top of the 2006 high in the low teens.

A recovery wave remounted the broken 50-month exponential moving average (EMA) in the mid-teens in 2009, setting the stage for strong rallies that ended in 2012 and 2015. The moving average provided support during steep corrections into 2013 and 2016, offering dip buying opportunities ahead of impressive upside. The 2016 buying impulse cleared 2015 resistance in early 2017, generating a channeled uptick that accelerated into the third quarter of 2018.

Buying pressure stalled below $230 in August 2018, while a failed October breakout attempt triggered a reversal that broke a small-scale double top with support near $215. The stock remounted that level on Wednesday but is trading much lower after earnings, reinforcing new resistance that is narrowly aligned with the 50-day EMA. Given recently bearish action, the next bounce into this price zone could offer a profitable short sale for the fast-fingered crowd.

The sell-the-news reaction could signal an important test at the psychological $200 level. Ironically, potential buyers should hope that support level breaks because the unfilled August gap between $190 and $197 has narrowly aligned with the 200-day EMA and 50% retracement of the rally wave that started in February 2018. This harmonic convergence could offer a more advantageous price to get on board.

Apple stock has held up better than the broad market during the recent correction and could find committed buying interest without a steep decline. A close above the $215 to $216 zone will offer evidence that bulls have retaken control, supporting a potential breakout above resistance near $230. Long-term technical readings remain highly bullish, so that event could generate considerable upside.

Apple stock is selling off after strong quarterly results and could reach the low $190s before attracting renewed buying interest.

<Disclosure: The author held no positions in the aforementioned securities at the time of publication.>