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Are Bears About To Maul Apple Inc. (AAPL) Stock?

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Apple Inc. (AAPL) stock is still hovering just below the all-time high it hit this week, although chart technicians warn that tougher times could be just around the corner. Meanwhile, analysts are saying buy, buy, buy, and the news of Berkshire Hathaway’s quadrupling-down on the iPhone maker during the fourth quarter seems like endorsement enough.

ElisaRiva / Pixabay

So are the bears about to take over Apple Inc. (AAPL)’s chart, or will the bulls continue to run wild?

Chart technicians warn of bearish pattern on Apple (AAPL) stock chart

According to MarketWatch, the Apple Inc. (AAPL) stock chart displayed some disturbing intra-day trends on Wednesday despite closing at a record high for the third day in a row. Chart technicians saw what’s called a “candlestick” chart forming a traditional bearish “doji” pattern. They believe the pattern suggests that there will be a short-term downtrend in the very near future.

Apple Inc. (AAPL) stock rallied during regular trading hours on Tuesday before opening at $135.52 on Wednesday. Wednesday was a choppy session during which the iPhone maker’s shares bounced up and down throughout the day before closing the session nearly where it opened and around the midpoint of the intraday range.

This presents a classic “doji” pattern according to the Japanese candlestick charts, which have been around for more than two centuries. The word “doji” means “at the same time,” and when a doji follows a massive tear in a stock price, it’s considered a sign of indecisiveness on the part of investors. It’s also a warning of an impending trend reversal because it implies “indecision at a time that bulls should be most decisive,” explains MarketWatch.

Apple stock is overbought

Apple Inc. (AAPL) stock has also entered overbought territory, at least according to the Relative Strength Index. That index compares the magnitude of price gains and losses, and when it rises over 70, it suggests a stock is overbought. In Apple’s case, the index neared 90 on Wednesday, the closest it has been to the 91.50 it reached in November 2004.

Investors have another reason to be concerned about the “doji” pattern, as a similar reversal happened in January 2006. Apple stock plunged following a long uptrend and big daily gain. The shares edged higher for the next couple trading sessions right after the 2006 doji, but they dropped off a cliff soon after and plunged by up to 40% until they hit bottom six months later. At that time, the Relative Strength Index was also in overbought territory just as it is now, adds MarketWatch.

Warren Buffett buys AAPL stock

Analysts have been whipping investors into a frenzy, assuring them that this will be the year the company takes them on a rocket ride to the moon with an iPhone 8 or iPhone X that does everything but make toast. Then this week, a regulatory filing revealed that Warren Buffett’s Berkshire Hathaway gobbled up more shares of Apple Inc. (AAPL) stock during the fourth quarter, quadrupling its holdings in the company. But it was after that news broke that the shares entered a period of choppiness.

Buffett is known for his acute ability to see value and recognize when a stock is undervalued, but he has traditionally avoided most tech stocks. It’s speculated that his portfolio managers were mainly responsible for the purchase of Apple Inc. (AAPL) stock, although anything the size of this stake probably required his approval. After the year-to-date run, Buffett’s firm may not buy any more shares any time soon… unless, of course, the doji chart pattern is right and a major downtrend is about to begin.

Shares of Apple Inc. (AAPL) stock edged higher by as much as 0.16% to $135.55 during regular trading hours on Friday.

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