Apple (AAPL) is expected to deliver solid earnings growth for the December-ending fiscal first quarter on Thursday. But several analysts expect Apple to guide lower for the current March quarter due to weakening iPhone X demand. But what is the stock chart telling us right now?
X Apple should report a 14% earnings per share gain to $3.82 with revenue climbing 10% to $86.02 billion. For Q2, the consensus is for year-over-year growth to accelerate, with EPS up 38% to $2.10 and sales swelling 26% to $66.54 billion. But some see sales as low as $62 billion.
Shares of the Dow Jones industrial average component fell 3.9% in last week's stock market trading to 171.51. The stock fell below a flat-base buy point of 176.34 and its 50-day moving average in the heaviest weekly volume since the week ended Nov. 3.
Meanwhile, the S&P 500 index advanced 2.2% last week to a record high. That big divergence between the S&P 500 and the world's most valuable company underscored Apple's current status as a lagging stock, not a leader. Apple shares fell 2.1% to 167.96 on Monday, turning slightly negative for 2018.
The relative strength line, which tracks a stock's performance vs. the S&P 500 index, has been trending lower since early November. Even as the stock cleared its buy point several times in recent weeks, the RS was well off its highs. The RS line (the blue line in the chart below), sank to its lowest level since June.
Apple retreated 0.6% Tuesday to close at 166.97, falling intraday to its lowest level in nearly three months. The RS line rose slightly as Apple fell a little less than the S&P 500, which fell 1.1%.
Investors should be looking for stocks with RS lines that lead or confirm breakouts.
Apple's weakness is backed up by trouble with iPhone-related stock plays, including Apple chipmakers and companies involved in the OLED screens used in the iPhone X and other high-end electronic devices. However, Qorvo (QRVO) shares did jump 3.6% on Tuesday, retaking its 50-day moving average ahead of its earnings Wednesday.
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Apple bulls are hoping that the iPhone giant will deliver standout holiday quarter results and offer guidance that's strong or at least not as bad as many analysts fear. If so, Apple shares could rally. But it's dangerous for investors to try to prove that they know better than the collective knowledge of the market. The way to outperform the broader averages consistently is to listen to what the market is saying right now.
And right now — not last year, not two weeks in the future — the market is cool on Apple.
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