Know what you're getting into when trading Apple stocks this year
Apple has been one of the most popular stocks for years and looking at the price it is clear to see what has attracted traders. It is important for traders to think about the timing of the investment, especially when using leveraged products such as CFDs. Throughout the article we will review different aspects of the stock itself and the stock market which you need to reckon with before deciding to invest.
Firstly, it is important for traders to conduct the following before opening trades in the stock market:
- Technical analysis - The analysis of the price movement, price indicators and trends
- Fundamental analysis - The analysis of the company's latest developments such as the most recent financial statements and the predictions for the next financial statements (released every 3 months). These statements may include earnings per share, revenue, sales etc.
- Ensure you are trading with the appropriate levels of leverage and exposure
The latest developments
Recently, the instrument has been in a downtrend that started in mid-January 2021. The main factor that provoked the decline in the company's securities, as well as the entire US technology sector, was the unexpected growth of the bond market. The technology sector is highly investment dependent. If low-risk bonds generate income comparable to stocks, then investor funds outflow into bonds.
Also, Apple Inc. stocks are under pressure from falling consumer purchasing power due to the COVID-19 pandemic. Yesterday, the company announced that it had to cut its iPhone production plan by 22%. At the end of last year, the corporation placed an order for the supply of parts for the production of 96 million smartphones, but yesterday announced that the plan was altered and only 75 million will be produced. The plans for the production of the iPhone 12 mini have been largely revised, as the company fears low demand for the expensive model. Now, the stock continues to decline. According to the latest forecast, the company's profit for the quarter ending in March is expected to be lower than in the previous period, by almost 40%, which is another negative factor.
The Nasdaq index is the main indication for the sentiment and trend regarding the overall technology-based industry. For this reason, traders not only analyse the price movement of Apple's Stock, but also the overall movement of the NASDAQ; which to a certain level, represents the general industry. The instrument over the last 2 trading days is trading in both directions, currently trading at 12838.0. You are able to look further into the price movement through the MT4 platform.
This week the 10-year US Treasury rate was 1.523%, well above the 1.155% shown at the last trading. As expected, the Nasdaq tech index is currently being affected by the bond market growth, as this is known to be an alternative investment to the stock market. However, in addition to bond yields, investors are also monitoring the inflation rate, which this week remained at 1.7%, which is the highest level for the year. Earlier, the US Fed Chair, Jerome Powell, said that after the entry into force of the decree on the stimulus package in the amount of $ 1.9T, inflation may exceed the 2% threshold for a short time.
In the corporate segment, General Electric Co. shares decline should be noted. The company's board of directors recommended that shareholders approve the reverse stock split at a 1:8 ratio, which was received with quite a cold welcome.
The growth leaders in the index are: Walgreen Boots Alliance Inc. (+4.25%), Lululemon Athletica Inc. (+3.57%), Comcast Corp. (+2.95%), Fox Corp Class A (+2.83%). Among the leaders of the decline are: Lam Research Corp. (-4.56%), NetEase Inc. (-4.50%), Micron Technology Inc. (-4.36%).
A potential positive with regards to the stock and Tech industry in the medium-term is the economic stimulus package, which is due to be signed by the president eminently. The package includes an increase in unemployment benefits, direct payments to the population, tax breaks for certain entities, and assistance to local governments. Some analysts believe that in the context of widespread vaccinations and the recovery of the labor market, such an amount of aid is excessive and could lead to overheating of the economy and higher inflation. Though other experts have advised this can affect investors sentiment and the stock market positively, the next few weeks will reveal the reality.
Now looking back solely at Apple, let's look at the price movement of the stock which over the past 5 months has seen two main trends. During the months of November, December and the first half of January 2021, the asset witnessed a bearish trend measuring almost a 20%. Currently, the price has slightly improved but still trading almost 16% below the previous price highs.
The price movement when looking at the technical indicators on the MT4 still remains bearish for the time being, even with the slight increase this week. The price remains 6.89%, below the 60-day average price movement and 5% below the 30 day average price movement. The price is not currently being indicated as oversold on either Stochastic Oscillator, or RSI, nor can any positive crossovers be seen in either of the daily or 4-hour charts. Though it should be noted that the price does change, and the indicators will amend along with the price. For this reason, it is vital to keep analysing the market and the indicators while trading.
There is always opportunities and risks in the stock market as most individuals know, however it is important for traders to trade responsibly and to analyse the stock prior to trading and while the trade is open. The price of the instrument will always have periods of bullish and bearish price movements, but the positive aspect of CFD trading is that you are able to easily and instantly exit the market prior to any large movement or even amend the direction of the trade.
This article was written and submitted by eXcentral.
Disclaimer: This material is considered a marketing communication and does not contain, and should not be construed as containing investing advice or a recommendation, or an offer of or solicitation for any transactions in financial instruments or a guarantee or a prediction of future performance. Past performance is not a guarantee of or prediction of future performance.
Risk Warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 77.15% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money
