(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

Apple Inc.'s (AAPL ) stock has nearly tripled over the past five years, easily outpacing the returns of the S&P 500. Since reaching a high of $183.50 on March 13, shares of the iPhone maker have fallen by almost 8%. But the stock could be at risk of falling another 10% in what could amount to a short-term pullback, based on technical analysis. 

Apple's fundamentals remain strong, and its cheap earnings multiple of only 12.9 times 2019 earnings estimates of $13 per share could help to support the stock price even if shares do pull all the way back to the intraday low around $150 on Feb. 9. 

 

A Breach of Technical Support

Apple has fallen below an important technical support level at $168.85, and that is a bearish indication because that support level has turned to technical resistance. The stock has failed to get above resistance at $168.85 on multiple attempts. It puts the stock at serious risk of falling to long-term uptrend that has been in place since June of 2016 around $159, a decline of about 4% from its current price around $166.

The Risk for a Sharp Decline

The more prominent risk for Apple comes should it fall below support at $159.50, because that could trigger a wave of selling that could lead to the stock retesting the Feb. 9 intraday lows around $150, a decline of nearly 10% from the current stock price. 

But the one thing that is going in Apple's favor is that the relative strength index (RSI) had previously bottomed at below 30 back in February and is trending higher. An Investopedia article on Feb. 7 noted this bottom in the RSI as a bullish signal the stock could rebound. (See: Why Apple's Stock Will Bounce Back)

Strong Fundamentals

The outlook for Apple's earnings looks strong in the upcoming quarter with analysts forecasting earnings to grow by nearly 29% to $2.70 per share, while revenue is expected to increase by almost 16% to $61.27 billion. Annual growth rates are almost as nearly as strong, with earnings expected to climb by roughly 25%, on 14% revenue growth. 

Technology stocks have come under fire, as scrutiny over Facebook Inc.'s (FB) user privacy build and Amazon.com Inc.'s (AMZN) use of the U.S. Postal Service has caught the attention of President Trump. Should Apple shares continue to fall, it is likely to be short term and a result of the stock getting dragged lower by the overall technology sector. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance. 

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.