Apple - when small is potentially better

Apple have really optimised the moves we’ve seen in Dow Jones, S&P and NASDAQ since the February low, although the tech giant has had a reasonable outperformance relative to these broader indices.  

Source: Bloomberg

Despite a 14.4% rally since 11 February, Apple’s valuation is not overly stretched on 11.6 times forward earnings (Bloomberg consensus), however price action on the daily chart is looking like a new catalyst is desperately needed. Good supply is keeping the share price suppressed on moves above $106 and indecision can clearly be seen on the candles, although no clear sell signal has yet been produced and price is still effectively respecting the rising channel support. The 20-day (red line) and 50-day moving averages highlight that the trend is still very much up.

A break above $107 would reinvigorate the upside momentum, but this appears likely to come from a further improvement to sentiment in global equities generally rather than Apple specifically. On the downside, a break of channel support at $104.50 and 4 March high of $103.74 would suggest a re-test of $100 and the 50-day average.

Today’s highly anticipated product launch has not been a catalyst for upside, although the bulls will argue that we haven’t seen a classic ‘buy the rumour, sell the fact’ scenario play out either. To be fair, the launch was in line with analyst expectations, with the key talking point being the new iPhone SE (a play on the old 5S but with an impressive A9 processor, Apple Pay and a superior camera). The phone is priced at $399, which is just below the low end of the pricing views of $400 to $500. This is also some 40% below their average selling price, which is an interesting angle for the company to take.

Another key launch was the 9.7-inch iPad Pro, which has a starting price of $599. We also saw the Watch being cut across the various models. Again, there simply wasn’t a new catalyst here for the market and these announcements can be seen as more of a product refresh.

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