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Buy Like Buffett or Pass on Apple After 10% Two-Day Skid?

By Bret Kenwell

During market corrections, they say the general fall last. At its peak, Apple  (AAPL Get Apple Inc. Report sported a $3 trillion market cap, firmly entrenching itself as a market general.

Even amid all the market-wide selling and drama, Apple held pretty steady. Shares were routinely down 10% to 15% at the most and in March, it was as a market leader on the rally.

It was joined by Tesla  (TSLA Get Tesla Inc Report and Nvidia  (NVDA Get NVIDIA Corporation Report, two other stocks that have gone on to crumble as well.

Now though, the tides have been shifting as they have eroded away at Apple stock. Shares fell 5.2% on Wednesday and are down another 5% today.

Down 10% in two days and it completely demolishes the confidence investors had in Apple, as it was down “just” 15% from the highs before this recent fall — holding up almost twice as well as the Nasdaq.

Now 24% off the high and investors have a big decision at hand: Do they buy like Warren Buffet surely is or do they pass and wait for lower prices?

Trading Apple Stock

Weekly chart of Apple stock.

Chart courtesy of TrendSpider.com

The break below $150 was decisive and clear. Apple stock didn’t hesitate, plummeting through this mark and giving traders a clear sign that it was heading lower.

Put in the simplest terms possible: Above $150 was good for bulls, below was bad.

Once it broke $150 — a key support area and the first-quarter low — we had to shift our attention to lower levels of interest.

Clearly the 21-month moving average didn't do much to attract the buyers or scare off the sellers, as the bounce on Thursday only lasted a few hours.

So now what? Bulls must keep an eye on the $138 zone. This level was the high in the summer of 2020 when Apple rallied on its stock split and resistance until mid-2021 when Apple finally broke out over it. Then it was support in the fourth quarter.

To see how it handles from here will be key. If it’s support, bulls will likely look for a bounce back up toward the $150 area to see how that area then responds. Will former support turn to resistance or will Apple reclaim it?

That will be the thinking if we bounce from $138.

If Apple stock doesn't bounce, then it opens the door down to the low-$130s. That’s where we find the 38.2% retracement from the 2022 high down to the March 2020 Covid low. It’s also where we find the 161.8% downside extension from the March high to the first-quarter low.

Below that and the low- to mid-$120s could be on the table. For now though, we wait to see how Apple handles the $138 zone. 

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