Apple Inc. Faces Market Challenges as Shares Enter Technical Correction

TipsForTraders | March 6, 2024

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Apple Inc., the technology behemoth once revered for its market-leading position, has recently faced a downturn, stirring interest among traders as its shares plummeted below a key psychological mark, signaling the company’s first technical correction since August. This decline saw Apple’s stock fall short of maintaining the $180 support level, dipping below $170 during trading sessions. Todd Sohn, a respected figure in ETF and technical strategy at Strategas Securities, pointed out that this downturn could hint at a further retreat to its October low of $165.67 if the trend persists.

Despite the recent setbacks, Sohn remains cautiously optimistic about Apple’s short-term prospects, suggesting a potential rebound given the oversold condition. However, he also notes the weakened trend, which may lead traders to adopt a more bearish stance should the price attempt to recover to $180. This downturn has significantly impacted Apple’s market valuation, erasing over $300 billion and relinquishing its title as the most valuable U.S. company to Microsoft Corp. This shift comes amid a challenging period for Apple, marked by regulatory challenges, diminished sales in China, and growing skepticism about its growth potential, especially following a lukewarm fourth-quarter outlook that highlighted softening demand for its products.

The company’s struggles have not gone unnoticed by short sellers, who have found Apple to be a lucrative target, with S3 Partners citing it as the second-most profitable short position in February. This development raises broader concerns about the potential impact on the tech sector, especially given Apple’s substantial influence.

Despite Apple’s recent performance woes, its relationship with broader market indices such as the S&P 500 remains moderate, with a correlation coefficient of 0.65, according to Jeff Rubin from Birinyi Associates. This suggests that the overall market can continue to advance even in the face of Apple’s challenges, provided the company’s stock doesn’t breach its long-term upward trend from 2020 lows.

Mark Newton, Fundstrat Global Advisors’ head of technical strategy, echoes this sentiment, indicating that while Apple’s current state does not pose an immediate threat to the market, it is crucial for the stock to avoid further declines to maintain market health. Newton views any forthcoming weakness in Apple as an opportunity, suggesting that the stock could become increasingly appealing in the near term.

In conclusion, Apple Inc.’s recent downturn presents a complex scenario for traders and investors alike. The company’s influence on the market is undeniable, yet its current challenges offer both risks and opportunities. The coming weeks will be crucial in determining whether Apple can reverse its fortunes or if its decline will have a more profound impact on the broader technology sector. As it stands, the situation underscores the importance of monitoring technical indicators and market trends, as well as the interconnectedness of major tech companies with global financial markets.