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Time to Take Aggressive Apple Profits

Dow component Apple Inc. (AAPL) has posted higher prices in 11 consecutive sessions, lifting more than 17% off a four-month low. The relentless uptick has recouped 100% of the losses posted between early February and mid-March, bringing the tech icon within seven points of December’s all-time high at 182.94. However, price action since October has been chaotic and incomplete, warning market players that now is the perfect time to take aggressive profits.

Headwinds May Dampen Growth

Apple introduced the downsized iPhone SE on March 8 but The Nikkei just reported plans to cut production of the smartphone by 20%. The Russia – Ukraine war is apparently taking a toll on sales, leading the company to slash inventories. The decision raises questions about the broader product catalog, warning that consumer sentiment may be deteriorating at the same time that inflation is raising prices and undermining buying power.

China could also undermine first half sales, according to Counterpoint Research tech analyst Brady Wang. He notes the “overall smartphone market has seen unreasonably high levels of inventory and will eventually undergo a correction”, adding that “we see the end demand for smartphones in China is quite weak. … In addition, the Russia-Ukraine war will likely have spillover effects to the whole European market and on consumer demand.” Wang expects just 5% smartphone growth across the board in 2022.

Wall Street and Technical Outlook

Wall Street consensus stands at an ‘Overweight’ rating based upon 27 ‘Buy’, 6, ‘Overweight’, 8 ‘Hold’, and 1 ‘Underweight’ recommendation. Price targets currently range from a low of $160 to a Street-high $215 while the stock is set to open Tuesday’s session about $17 below the median $193 target. Ratings and targets have barely budged so far in 2022, raising odds for downgrades as the impact of war and inflation work their way into the bottom line.

Apple rallied above the January 2020 peak in June, entering an uptrend that stalled near 138 in September. Price action then eased into a rising channel that has remained in force for the last 18 months. The stock bounced at pattern support mid-month and has now lifted into the middle of the channel, which also marks a natural mean reversion zone. In turn, this indicates the stock is no longer oversold after the big bounce and that further progress may have to wait until a reversal shakes out short-term players.

Catch up on the latest price action with our new ETF performance breakdown.

Disclosure: the author held no positions in aforementioned securities at the time of publication. 

This article was originally posted on FX Empire