Apple needs no introduction. It is the biggest, most profitable company in the world and the top holding in Warren Buffett’s Berkshire Hathaway portfolio. And indeed, breaking sales and earnings records quarter after quarter at such a huge scale means Apple really is a great business.
But after reaching an all-time high of $145.09 on January 25th, the stock has been a disappointment. The price fell below $118 yesterday before recovering to close the week at $121.42, down 16.5% in less than two months. Is this a buying opportunity or the beginning of a bigger decline? Let’s find out.
The hourly chart of Apple reveals that the structure of the recent weakness is impulsive. The pattern is labeled 1-2-3-4-5 in wave (a) and, according to the Elliott Wave theory, indicates the direction of the larger trend. On the other hand, a three-wave correction in wave (b) is supposed to follow first.
If this count is correct, we can prepare for a notable corrective recovery to roughly $130, before the bears return. Even if a deeper wave (b) occurs, targets below $117 remain plausible in wave (c) as long as the stock trades below $145.09. In our opinion, it is too early to buy the dip in Apple. Not to mention that the stock is trading at a rather expensive forward P/E ratio of 28.
Similar Elliott Wave setups occur in the Forex, crypto and commodity markets, as well. Our Elliott Wave Video Course can teach you how to uncover them yourself!