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Apple Shares In Neutral Going Into Earnings

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Apple reports after the market closes on Tuesday. After a sharp upward move from around $160 to $185 in early May after it announced its March quarter results, the stock has been trading between $180 and $195 for almost three months. Going into this earnings report, the stock is in a fairly neutral technical position with a Relative Strength Index or RSI of 49.8 (50 being neutral) as can be seen in the top portion of the chart below.

Going into the Tuesday’s announcement

In the two prior quarters, Apple stock had broken below its 50 and 100 day moving averages, the blue and red lines, respectively, on the chart, and had also fallen below its 200 day moving average. Going into Tuesday’s announcement, the shares are trading above all three moving averages.

The stock is essentially at a dead even neutral position with an RSI of 49.8. While it did get slightly above 70 in early May and early June, it hasn’t entered a very oversold or overbought condition for over a month.

Compared to the two previous quarters

Before Apple announced its December 2017 and March 2018 quarters there were a lot of concerns about what the company would announce, especially what its revenue guidance would be given the later than usual availability of the iPhone X. The stock had sharp moves downward going into earnings and was in an oversold position with its RSI just above 30 in January and below 40 in April.

Apple price chart

StockCharts.com

Apple announced its December quarter earnings on February 1. The shares had fallen from $179.26 two weeks before the announcement on January 18 to $167.78 the day of the release. It then fell $12 over a week to $155.15 for a total decline of $22.

However, in the course of the next five days, it sharply rallied over $17 to close at $172.99. It took another three plus weeks to recoup all the downward move and closed at $179.98 on March 9.

While Apple’s stock didn’t fall as much going into the March quarter results as they did the prior quarter, they did drop from $178.24 to $162.32, or $16, bottoming out two days before the announcement. They climbed $7 over the next two days before the company released its results and the stock immediately responded the next day, increasing over $7 to close less than $2 below its recent high.

Berkshire Hathaway added fuel to the fire when Warren Buffett announced it had made its largest purchase of Apple stock, which got the stock to pop to almost $184. The rectangles denote when Berkshire has made larger purchases of Apple shares with the circle indicating when the announcement was made.

Warren Buffett Apple purchases

StockCharts.com

This doesn’t mean the stock couldn’t move higher

Apple’s June quarter results aren’t normally viewed as being quite as important as other quarters.

* September quarter results typically include the first week of new iPhone sales and provide guidance for the all important holiday quarter.

* December quarter has the holiday results and the March quarter guidance gives an indication how much leg the new iPhones should have.

* March quarter is probably the second least important quarter unless its results fall flat and/or the June quarter guidance is considerably different than what investors are expecting.

The June quarter results probably won’t get the shares to move much unless there is a meaningful miss or outperformance. It will probably take better than expected revenue guidance for the stock to move meaningfully higher off of the earnings release.