Apple 50-Day Average May Signal Further Drop: Technical Analysis

Apple Inc. (AAPL) dipped below its 50-day average yesterday for the first time since December. A weekly close below that level may signal a decline of as much as 19 percent from its record high is under way, according to UBS AG.

Shares of the Cupertino, California-based company dropped in nine out of the 10 past days, sinking 10 percent after reaching an all-time high of $636.23 on April 9. The stock yesterday briefly sank below its 50-day average of $570.76 before recovering some losses to close at $571.70.

Should Apple fail to hold above its 50-day average, it may trigger a retreat to as low as $515, according to Peter Lee, the New York-based chief technical analyst for UBS.

“Violation of this level on a weekly closing basis opens the door for a deeper correction,” Lee wrote in an e-mail yesterday. “To convince traders to return, AAPL needs to rally” above $600 at least, he said, referring to the stock’s ticker.

Apple retreated from the best quarterly gain since 2004 amid speculation that the iPhone maker won’t be able to keep growing at the pace that made it the world’s most valuable company. The stock rallied 48 percent from January through March as fourth-quarter earnings beat the average analyst estimate by the most since 2009. The company may say later today that net income rose to $9.96 a share, according to the average analyst forecast in a Bloomberg survey.

The stock has stayed above its 50-day average for 85 days since Dec. 20, data compiled by Bloomberg show. The last time Apple ended a longer streak above 50-day average, during the 132 days through March 14, 2011, it spent the following nine months oscillating around the 50-day gauge before rallying to a record.

“Once the current downside action gets worked out, I want to see a similar pattern,” Arthur Huprich, an analyst with Raymond James & Associates Inc., wrote in a note yesterday. Given “its poster boy image for growth and leadership, the earnings report could make the ‘tape’ very interesting.”

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net

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