Apple Inc. (AAPL) stock began the fourth quarter setting an all-time intraday high of $233.47 on Oct. 3, which was a test of my weekly pivot. This was a warning, as the stock also had a weekly stochastic reading above 90.00 which defines an "inflating parabolic bubble."
The stock closed Tuesday, Oct. 30, at $213.30, up 26% year to date and in bull market territory at 42% above its 2018 low of $150.24 set on Feb. 9. At Monday's low of $206.09, the stock slipped into a correction, down slightly more than 10% below its high. Apple is the best performing stock in the Dow Jones Industrial Average, which ended Tuesday at 24,874.63, up 0.6% year to date but 7.7% below its all-time high of 26,951.81, also set on Oct. 3.
Apple reports its third quarter earnings after the closing bell on Wednesday, Oct. 31. Analysts expect the iPhone icon to report earnings per share of $2.78 to $2.90. For investors, the post-earnings volatility will be a trick or treat on Halloween. Sales of the iPhone have been the earnings driver, but growth has slowed over the past several quarters. This makes it important for the company to show stronger sales elsewhere, such as Apple Play, Apple Music, AppleCare and iCloud storage applications.
The daily chart for Apple
The daily chart for Apple shows that the stock has been above a "golden cross" for a long time. This market-positive signal gave investors the opportunity to buy weakness to the 200-day simple moving average at $159.54 on Feb. 5 and again at $165.64 on April 23. The two horizontal lines in the middle of the chart are my semiannual and annual value levels at $181.73 and $176.57, respectively. The annual level was a pivot or magnet between Jan. 12 and May 3. The horizontal line at the top of the graph is my quarterly pivot, which failed to hold on Oct. 5.
The weekly chart for Apple
The weekly chart for Apple is negative, with the stock below its five-week modified moving average of $217.38. The stock is well above its 200-week simple moving average, which is the "reversion to the mean," at $139.58. Note how the "reversion to the mean" was a buying opportunity between the weeks of May 6, 2016, and July 1, 2016, when the average was $93.31. The 12 x 3 x 3 weekly slow stochastic reading is projected to end this week declining to 64.36, down from 74.02 on Oct. 26.
Given these charts and analysis, investors should buy Apple stock on weakness to its 200-day simple moving average of $191.76 and reduce holdings on strength to quarterly pivot of $227.22.
Disclosure: The author has no positions in any stocks mentioned and no plans to initiate any positions within the next 72 hours.