Apple: A Move Higher Is Likely Coming

Key Insights

• Despite a significant decline in the stock market in 2022, Apple’s total net sales increased by 7.79% from the last year.
• A decline in Apple in 2022 reaches the 38.6% Fibonacci retracement level, estimated from the 2019 low.
• The emergence of a bull flag in the Apple price chart indicates a strong move upside as long as $125 is supported.

Apple Inc. (AAPL) is an attractive investment due to the company’s solid financial track record, a diverse array of successful products and services, and a large base of loyal customers. Apple is a leader in innovation and technology and is likely to develop new innovative products and services in the future. The company returns value to shareholders via dividends and share buybacks.

The price of Apple stock has been increasing in a parabolic fashion in the last couple of years and peaked at $180.85 in January 2022. After reaching a peak in 2022, the stock declines due to the significant downturn in other technology stocks and the prevalent rotation out of technology stocks. Inflation and interest rate concerns also contributed to the decline in Apple’s stock value.

The article provides near-term and long-term outlooks for Apple, based on the current economy and technical analysis. The drop in Apple from the 2022 peak hits the 38.6% Fibonacci retracement level from 2019 lows, which represents an excellent buying opportunity for investors. Nevertheless, based on the stock’s recent technical performance, any drop below $104 is regarded as a significant collapse.

Inflation, Interest Rates, and Apple

Due to the rise in prices of goods and services, inflation is the greatest threat to the US economy, as it reduces the purchasing power of the currency. In order to combat inflation, the Federal Reserve is steadily increasing interest rates, which is now above 4%. The following chart illustrates the relationship between inflation and the Consumer Price Index (CPI). The CPI values have decreased to 6.4% due to the rise in interest rates above 4%, which is still a very high inflation rate.

Apple is suffering from higher inflation due to wage increases, higher commodity prices, and higher logistics costs. These factors have an effect on the product’s cost and Apple’s performance. On the other hand, higher inflation reduces consumer purchasing power, which in turn reduces product demand. The persistence of rising inflation and interest rates has increased the likelihood of a recession in 2023.

The strong dollar in 2022 has caused Apple to decline 2022; however, Apple stock appears to be stronger than other large-cap technology rivals that are down more than 40%. Apple remains strong due to its extraordinary fan base, which continues to purchase new products and services. Despite a very poor economy, the Covid-19 crisis, and geopolitical events, Apple has performed exceptionally well and earned a total of $394.33 billion in net sales. Apple’s net sales increased by 7.79% in 2022, as shown in the following chart.

What Is Next In Apple?

The value of the US dollar and the stock price of Apple are not directly related. However, changes in the value of the US dollar affect the stock market as a whole and therefore affect Apple indirectly. The stronger US dollar makes US products more expensive for foreign buyers, especially in emerging markets. This results in lower demand for US exports. Therefore, a higher US dollar indicates Apple has a lower demand for Apple products in the foreign market.

Despite the stronger US dollar in 2022, Apple has received enormous net sales. Currently, based on the dollar’s technical evaluation, its value tends to decline further. The US dollar achieved its long-term target in 2022 at 114-115 levels. Therefore, the price has developed a strong bearish formation as shown in the chart below.

A decline in the value of the US dollar in 2023 will increase the demand for Apple products in international markets. The increase in demand for Apple will increase sales and earnings, which will have an effect on the stock price. Currently, Apple is trading at a lower level, signaling a favorable entry point for investors.

Technical Evaluation

According to the monthly chart for Apple, the price is currently trading at the support level. The pullback in Apple has reached the 38.6% retracement level of the recent bull move from January 2019’s low. Typically, a bull market bottom occurs at a 38.6% retracement. On the other hand, this decline in Apple has formed a bull flag, a strong bullish price action that will support a strong move toward higher levels, if $180.85 is breached.

On the breach of $180.85 in Apple, the price will skyrocket upwards due to high investment demand. We have been bearish on Apple for the past year, however, we are now raising concerns about a possible bottom at current levels. The bottom has not yet been confirmed, and prices could still decline.

To comprehend the current risk associated with Apple, the weekly chart can illustrate the technical scenario of the key levels. The chart below depicts the formation of a head-and-shoulders pattern, which is confirmed if the price falls below $104.

Currently, the stock is rebounding from the $125 strong support line. Any break from $125 would result in a drop to $104, with the possibility of a significant drop. As shown in the chart below, a move to $104 would increase the likelihood of head and shoulders. Apple has the potential to go much higher from here if $125 support holds.

Conclusion

According to the preceding discussion, Apple has been a profitable investment over the past few years. The decline in Apple in 2022 was caused by various microeconomic factors, but it was not as severe as other technology stocks. This indicates that Apple is in high demand due to its solid customer base.

The value of the US dollar is likely to decline in 2023, which will increase the likelihood of Apple’s profitability and boost the stock price. Alternatively, the recent decline in Apple from all-time highs hits 38.6% from the 2019 low, which represents an excellent buying opportunity as long as $104 holds.

A breach of $104 will be extremely bearish based on confirmation of head and shoulders. On the basis of the above factors, it is likely that Apple will break to the upside, and investors should begin to buy Apple in anticipation of higher prices.