Technical analysis: Waiting for the Apple ‘death cross’

From Henry Suttmeier’s “Where To Buy Apple On Continued Downside Risk” posted Wednesday afternoon by Forbes:

Shares of Apple failed to hold its 200-day simple moving average at $159.70 on May 5. The downside risk is to its annual value level at $141.26. Blocking the upside is its semiannual pivot at $163.16. The weekly chart has been negative since the week of April 22 as a major warning…

If the stock stays below the 50-day and 200-day SMAs at $164.52 and $159.69, the downside risk and key level to hold is the annual value level at $141.26, which is the lowest horizontal line.

The higher two horizontal lines are the semiannual pivot at $163.16 and the monthly risky level at $173.50. If the monthly level falls below the semiannual level, a death cross will be confirmed.

The weekly chart for Apple is negative with the stock below its five-week modified moving average at $160.04. The horizontal lines are the annual value level at $141.26 and the semiannual pivot at $163.16. The 200-week simple moving average or “reversion to the mean” is at $97.23.

My take: “Death cross” is not nearly as spooky as it sounds. From Investopedia’s “What is a Death Cross?“…

The “death cross” is a market chart pattern reflecting recent price weakness. It refers to the drop of a short-term moving average below a longer-term moving average. The most closely watched stock-market moving averages are the 50-day and the 200-day.

Despite its ominous name, the death cross is not a market milestone worth dreading. Market history suggests it tends to precede a near-term rebound with above-average returns.

15 Comments

  1. Fred Stein said:
    Death cross means buying opty coming soon.

    And this voodoo does not account for buybacks.

    4
    May 12, 2022
  2. Jeff Galanti said:
    Based on his comments at the Berkshire annual meeting a few weeks ago, it is clear that Buffett will be buying more shares while they are on sale. Hopefully, Apple is accelerating things, too.

    3
    May 12, 2022
    • Fred Stein said:
      Yes, and hopefully other investors see this too. Price action and volume today so far seems to confirm this.

      Some will exit due to emotion or the need to cover other exposures. Wise investors see Apple’s long-term cash flow potential, insurmountable technology lead, and disciplined management.

      3
      May 12, 2022
    • Robert Paul Leitao said:
      Jeff: I just read a Morningstar research report suggesting Berkshire is among the most undervalued mega cap equities. For those looking for diversification, I suggest doing some research and taking a look. Not only do you get exposure to Berkshire’s insurance portfolio, there’s BNSF and Berkshire Energy as well. Warren Buffett has referred to Apple as one of the “Four Giants” for BRK. Of course, Apple is always available for purchase as a “pure play” on our favorite fruit company. All investors need to perform their own due diligence and be as informed as possible especially during these perilous market times before making any purchase decisions. Will BRK buy more Apple now? We’ll see!

      1
      May 12, 2022
      • Jeff Galanti said:
        @ Robert I agree wholeheartedly. I focus the majority of my 401k contributions into AAPL and BRK.B. One thing that most outsiders don’t realize about Berkshire is the phenomenon of their float. With about $140B in insurance float, Warren is effectively borrowing money at negative interest rates (presuming that the insurance operations have underwriting profits). Someone like Warren Buffett being paid to take cash that he will invest fairly wisely is like shooting fish in a barrel. This float is very sticky and only getting bigger over time. The fact that Warren has started making bigger and bigger buybacks of Berkshire stock should tell you all you need to know about what Warren thinks it’s worth.

        0
        May 13, 2022
  3. Aaron Belich said:
    I’m going to buy / dollar cost through the end of the month. I was going to wait more towards the end of the month before burning the dry powder, but this seems too good to let pass by.

    Just give me a little-YOINK!

    2
    May 12, 2022
  4. Robert Paul Leitao said:
    When the moon was in the Seventh House and Jupiter aligned with Mars, Apple’s share price got slammed by frenetic algorithmic trading that drove the share price back 10 months in time. Management responded over the next 12 months buying back shares in dollar volumes that exceeded the market cap of most of the components of the S&P 500 and all the lesser quality tech stocks that created the current market crisis got sucked into the massive black hole reported by the WSJ that sits at the center of the Milky Way galaxy. Investors fleeing the phenomenon (saved by passing Jedi starships as their investments careened toward the massive black hole) got smart, sold their shares in those stocks to Wookiees looking for a fast ride to the center of the galaxy and bought Apple. The price rebounded and all those investors that bought into overpriced glamor stocks acquired subscriptions to Apple News+ to learn how to do things better next time and we all lived happily ever after. I love happy endings!

    2
    May 12, 2022
  5. Roger Schutte said:
    Anyone buying any long dated calls?

    0
    May 12, 2022
  6. Richard Weathered said:
    Bought a few shares yesterday and a few more today and now sitting back and watching it again

    1
    May 12, 2022
  7. Michael Goldfeder said:
    With the cash on hand and Warren’s desire to buy the entire company, this is a perfect opportunity to remove tons of shares from the float!

    3
    May 12, 2022
    • Aaron Belich said:
      Apple really cleared out a lot in 2020…

      Looking at the daily / monthly average volumes taper down is incredible to review since buybacks kicked off.

      1
      May 12, 2022

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