Graphics created by OvalX writer
In this article we will examine the news surrounding Apple (NASDAQ:AAPL) supply chain issues and how it reflects on the tech giant’s stock price performance. Before moving on to the Apple technique structure, we’ll dig into the news coming out of both China and Apple before trying to gauge where this equity will stop next.
The Chinese city of Zhengzou, also known as “iPhone city”, is approaching its third month of experiencing a Covid 19 outbreak and Apple’s supply chain is also suffering.
On November 6, in a rare press release, Apple warned of “significant disruption” ahead of the holiday season and as China has chosen to relax its long-standing and very strict attempt to stamp out Covid-19 rather than manage it. , a perfect storm. appears to have broken out for the US tech giant when workers running the supply chain fall ill with the virus.
A fifth of the iPhones produced are sold in the Chinese market, but that is severely unbalanced in terms of supply, with more than 90 percent of iPhones being assembled in the country.
The Chinese government’s apparent mismanagement of its Covid 19 policies is starting to have a direct impact on the beloved digital world, but is it just a temporary blip or a more troubling case?
In June I put out a sell signal for Apple with Seeking Alpha with $129 as the key support level that this stock seeks to circumvent.
If we move to the chart below, we can see a close up of the bearish wave one two structure. An initial top of $183 in January saw a decline to $148 in March forming wave one. With the last price point reached, this also created the bullish candle wave two which allowed the third wave to form and fall to new southern pastures at lower levels.
The Fibonacci 161 was the next stop in the $129 region which was then achieved in June. Apple almost made an attempt to break higher and ride the bearish wave past that price region with a huge buy until the Jackson Hole speech was released in August and Apple has held on to a possible bullish Fibonacci setup ever since. 161. which has finally faded as the holiday season approached.
So let’s examine where the next technical stop may be price wise, assuming there is a clear break below the $129 region.
It is one of the defining rules of my book “The Ward Three Wave Theory” that a financial market must seek its third wave in order to numerically replicate its wave one. If this turns out to be true for Apple, then $115 is the next destination for this capital.
We can see from the chart below that $115 is the Fibonacci 200 of this structure, if this price is achieved then we can consider it to be a bottom by looking for bullish three wave patterns that can form on the lower time frames. Only when three wave patterns complete up from the daily, weekly, and eventually lead to the monthly chart, do we have any form of certainty that a bottom may be forming in that price area. With bullish wave patterns failing up through the time frames, it will be Fibonacci 261 that all eyes will be on below $100; but as we speak, we are several stages away from discussing that scenario.
In closing, I would expect Apple to complete at $115 within the next 30-120 days, a strong break of $129 will go a long way towards increasing the likelihood of this happening as it is also plausible that the stock price will only want to go down a bit. from here only to reset and form a new wave structure to the north. If $115 is reached, I will look for bullish wave patterns as mentioned and post an update on this.
On the Theory of the Three Waves
The three-wave theory was designed to be able to identify the exact probable price action of a financial instrument. A financial market cannot sail significantly up or down without making waves. Waves are essentially a mismatch between buyers and sellers and they print a picture of a likely direction and target for a financial instrument. When waves one and two have formed, it is the highest high/lowest low point that gives the technical indication of future direction. A wave one will continue from a low to a high before meeting significant enough rejection to form wave two. When a third wave breaks through a higher high/lower low, the only probable numerical target course available on a financial chart is the wave equivalent of a low to a high. It is very likely that wave three will seek to numerically replicate wave one before making its future directional decision. It may continue past its third wave target, but it is only wave one evidence that a price was able to continue prior to rejection that is available to consider as a likely target for a third wave.