Apple price analysis: A correction or end of the rally?

By:
on Sep 9, 2020
Updated: Sep 10, 2020
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  • Apple has shed more than $350B in value from the beginning of September
  • The price of Apple stock has weakened from $138 below $111 in less than five trading days
  • The current price of this stock stands around $117 and the market capitalization is around $2039B
  • A move to the $105 - $110 area would offer a good opportunity for traders looking to buy Apple stock

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The technology sector is now in a correction from its recent highs but most analysts are not worried about the recent action in technology stocks. Shares of Apple (NASDAQ:AAPL) extended its correction from the record highs above 135, registered in the first week of September.

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Despite this, there is no reason to panic and as long the price of Apple stock is above $110 this stock is in the “BUY” zone. Traders and investors should focus on the next set of product launches coming in the next few days. Apple announced a 5G iPhone event for September 15 but the company could potentially stagger the releases of the iPhones due to pandemic-related production delays. Even with the COVID-19 pandemic, the sale of Apple products is going extremely well, so a good phone launch could lead to an increase in revenue and earnings.

Fundamental Analysis: The overvalued stock that can be an opportunity only for short-term traders

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This stock has been one of the market’s biggest winners in the last several months. Apple’s Q3 report and stock split announcement sent the stock to a new all-time high above a split-adjusted $100, and the rally continued to nearly $138. Since then, markets have rolled over a bit, with Apple being one of the main culprits.

Apple’s shares fell through support on fears of the coronavirus Covid-19 pandemic environment but the recent sell-off created an attractive opportunity for the short-term traders. At its current share price, Apple could be a very good short-term investment with solid growth prospects.

I said short- term investment because with $2039 billion market capitalization this stock is overvalued in my opinion and represents opportunity only for short-term traders. Profitability ratios also confirm this, P/E is above 30 which confirms that this stock is expensive. The company’s revenue decreased in 2019 to $260B from $265B in 2018 but the growth projects will ensure that the numbers will be moving up in the future. It is also important to mention that the net income in 2019 was $55B while the net income in 2018 was $59B.

Technical analysis: As long the price is above this trend line this stock is in the “BUY” zone

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Data source: tradingview.com

Many traders were looking for a pullback to accumulate more of the Apple stock, and that opportunity is now here. When we take a look at the chart above ( one year period), we can see that the price of this stock has advanced from $50 to $138 and after that started to fall.

As long the price is above this trend line this stock is in the “BUY” zone and there is no indication of the trend reversal. If the price falls on the trend line and if we get a “bullish” confirmation candle it would be a very good entry point for short-term traders who are trading with “stop-loss” and “take profit” orders.

The trend line represents a very strong support level, if the price breaks this trend line it would be a very strong “SELL” signal and we have an open way to $100 ( this is also a strong support level). If the price jumps above $120 (short- đterm resistance level) that would be a confirmation of the “bullish” trend and open way to $130 or even $150.

Summary

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The price of Apple stock has weakened from $138 below $111 in less than five trading days and the current price stands around $117. Despite this, there is no reason to panic and as long the price of Apple stock is above $110 this stock is in the “BUY” zone. Traders and investors should focus on the next set of product launches coming in the next few days. Apple announced a 5G iPhone event for September 15 but the company could potentially stagger the releases of the iPhones due to pandemic-related production delays.

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