Apple’s stock was a safe haven for the most of year in a sea of broken down tech names, but its chart is now signaling weakness that could have implications for the broader market. The company’s China exposure has become an Achilles’ heel for a stock that has held up as other major names, like Alphabet and Microsoft, lost support and broke to new lows for the year. Apple stock was down more than 2% Tuesday, after declining Monday and Friday. The stock is down about $10 since Thursday’s close. Late last week, the stock slipped on concerns about an employee walkout and protests at Apple supplier Foxconn over a pay dispute. Covid lockdowns in China and protests across the country also dampened sentiment about Apple. “The China news started to hit concerns about whether it could impact iPhone production,” said Scott Redler, chief strategic officer at T3Live.com. “Now Apple is more of a headwind for the market versus a constructive name. If this doesn’t get rectified soon, it’s going to be hard for any type of Santa Claus rally in the next few weeks.” Apple’s sizeable weighting Apple is 6.5% of the S & P 500 market cap, and technical analysts say it has implications for the broad market both in price impact and sentiment. The S & P 500 was trading lower Tuesday afternoon. “The [Apple] chart is toppy and deteriorating as many of its peers did earlier this year, and Apple is the holdout,” said Todd Sohn, technical strategist at Strategas. “If this in China situation gets worse, that’ll reflect what the chart is showing.” Evercore ISI analysts said that the Foxconn protests and walkout at Zhengzhou could have a revenue impact on Apple. In a note Monday, the analysts said iPhone demand could be impacted by 5 million to 8 million units in the December quarter. Technical analysts are watching several key points on the Apple chart, and note that stock has now traded below its 50-day moving average for a second day. That level was $145.97 on Tuesday. The 50-day is the average of the last 50 closes and is seen as a momentum indicator. The S & P 500 was trading lower but was still well above its 50-day moving average. Apple was fluctuating around the $141 level in afternoon trading. Key levels to monitor “Apple broke the $147 area Friday, at the same time the S & P broke below 4,000, and it’s been a headwind ever since,” said Redler. His next target is $134, then $127. “If it gets to that, the market gets a lot lower. We want to see it stay around here, or the Santa rally becomes less and less probable.” Katie Stockton, founder of Fairlead Strategies, said she has been watching Apple closely, and it has been underperforming since September, after outperforming from June through the summer. “For two months, we’ve seen a series of lower highs versus the S & P. The latest underperformance since September has investors on edge,” she said. “I think that’s the message. Apple is 6.5% of the S & P. I would say it’s remarkable how strong the S & P 500 is today with a 2% decline in Apple. It shows that the breadth is not bad.” Stockton said the next major support she is watching is that $127 chart point, which was where the stock consolidated in late 2020 through mid-2021. That is also close to the Fibonacci retracement level. Before that, there is a minor support level at $137. “For the weighting that it has and the influence on sentiment, if it breaks down below $137, that would be a negative for the broader market,” Stockton said. “I can’t imagine that happening without getting a sell signal on the S & P chart.” She said the S & P 500 chart is maintaining a buy signal that has been in place for several weeks. Stockton said it is hard to have conviction on Apple, and she expects the stock to ultimately head to the $127 level. “Regardless of what happens in the near term, we think that level will tested,” she said. Loop reiterated its buy on the stock Tuesday, noting that concerns about earnings estimates being too high are overblown. The firm says some of the concerns are in the stock already, and that there is “a commensurate revenue and EPS upside opportunity” beginning in the September quarter of 2023. –CNBC’s Arjun Kharpal and Michael Bloom contributed to this report
