October update: should you buy or sell Apple shares?

October update: should you buy or sell Apple shares?
Written by:
Stanko Iliev
2nd October, 19:29
Updated: 3rd October, 01:05
  • If the price falls below $100 it would be a strong “sell” signal
  • The US President Donald Trump contracted COVID-19
  • CEO Tim Cook has received his largest stock grant since 2011

The US stock market is pressured by the latest news that US President Donald Trump and wife Melania contracted COVID-19. The price of Apple (NASDAQ: AAPL) stock has weakened from $137 below $104 in less than several weeks and the current price stands around $113.

Fundamental analysis: The next several months will be competitive for the technology sector

Shares of Apple have 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.

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Since then, markets have rolled over a bit, with Apple being one of the main culprits. The price of the stock is currently impacted by the Covid-19 pandemic environment and the next several months will be competitive for the technology sector.

The US stock market weakened this Friday pressured by the news that US President Donald Trump has contracted COVID-19 and data showing a slowdown in recovery in the battered US labor market. According to the official release, the US added 661K new jobs in September, much worse than the 850K expected.

The positive news is that the unemployment rate in the same period ticked down to 7.9% from 8.4%. It is also important to mention that CEO Tim Cook has received his largest stock grant since 2011 and this is published in a new SEC filing.

Apple’s board of directors said in a statement: “For the first time in nearly a decade, we are awarding Tim a new stock grant that will vest over time in recognition of his outstanding leadership and with great optimism for Apple’s future as he carries these efforts forward.”

Apple stock has found strong support above $100 and some analysts believe that Apple may start trading higher in the upcoming weeks. Despite this, I feel that the price of this stock can weaken even more in the upcoming days and maybe it is not the best time to invest in Apple.

The risk/reward ratio is not good currently and my opinion is that there are lots of other stocks with more opportunity.

Technical analysis: The price could weaken even more in the upcoming weeks

Data source: tradingview.com

On this chart, I marked important resistance and support levels. The important support levels are $100 and $90, $120 and $130 represent the resistance levels. If the price jumps above $120 it would be a signal to buy Apple shares and we have the open way to $130.

Rising above $130 supports the continuation of the bullish trend and the next price target could be located around $150. On the other side, if the price falls below $100 it would be a strong “sell” signal and we have the open way to $90.

Summary

The price of Apple stock is currently impacted by the Covid-19 pandemic environment and the next several months will be competitive for the technology sector. Concerns about sluggish economic growth amid the ongoing pandemic continue to dominate the financial markets.  With a $1,96T market capitalization, this stock is overvalued in my opinion and maybe it is not the best moment to buy Apple shares.

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