The main expectation within yesterday's plan was that if the /ES could breach 5350, we could see a continued sell-down to 5320. However, due to today's sluggish nature, the index found support at the high-volume node (HVN) at 5340 and then rallied for the remainder of the session, closing at 5350. No bullish scenario was given, so today was simply a day of sitting on the sidelines.
AAPL
In the previous days, we had several great calls for AAPL. I had identified resistance at 196 and todays intraday support at 195. The initial expectation was that if the 195 level was maintained and then breached through 196, this would signal that 200 could be tested.
However, this outlook was completely contingent on AAPL's WWDC event today, where the company was set to reveal upcoming software developments and new “innovations”.
Additionally, On my Twitter, I shared that AAPL needed to showcase some AI implementation to make up for falling product sales.
To no surprise, the event was a snooze fest, showing simple quality-of-life improvements that, in my opinion, do not incentivize consumers to upgrade to the newest product lines.
From what I gather, the main gripes from this event seem to be:
1. Lack of Innovation: Many were hoping for more groundbreaking features or products. The “same old, same old” just did not cut it for everyone.
2. Overhyped Expectations: The rumors were churning, and some folks got their hopes up for something truly mind-blowing. When reality didn't meet those lofty expectations, disappointment set in.
3. Focus on AI: While partnering with OpenAI is a big deal, the sentiment was that OpenAI's integration into Siri was not significant enough to impress consumers.
4. iPad Neglect: The iPad did not get much attention in today’s event, which many found pathetic. AAPL finally added a calculator to the iPad—a basic feature that should have been there from the start. This update is very niche, and I don't see people rushing out to buy the newest iPad for a slight performance upgrade and a new calculator app. This is not new technology either; programs like Mathway have offered similar functionality since 2002.
5. Stock Price Impact: As we already know, the event did not have a positive impact on AAPL's stock price, which is due to the overall disappointment from the event.
I want to make apparent of the graph I have made above. The Sankey diagram I developed visually represents the flow of revenue from the different Apple products and services based on the 2023 revenue breakdown from the 10-K report. The thickness of each flow line represents the proportion of revenue generated by each product category, with thicker lines indicating higher revenue contributions.
From this chart, we can see that the majority of revenue was generated from iPhone sales and services. However, when we examine the Apple 2024 Q1 10-Q report, we notice significant declines in sales within the iPad and wearables, home, and accessories categories.
iPad sales decreased by 25% year-over-year, indicating a substantial drop in demand.
Net sales in wearables, home, and accessories decreased by 11%, primarily due to lower net sales of wearables and accessories. This decline suggests challenges in maintaining the appeal or competitiveness of these products in the market.
Additionally, the report highlights a significant decline in net sales in China, which dropped by 13% year-over-year, as consumers opted to buy from Huawei instead.
When we take into account their financials, we can better understand why this event held such importance for Apple. iPads and wearables, such as Vision Pro, make up a small portion of their revenue, so focusing the majority of the event on these two product lines was, in my opinion, a very poor move from Apple.
Moreover, due to the decreased net sales in China, Apple needed to compensate, and the best way to do so was to boost iPhone sales or services. As I have noted on my Twitter, there has been no real incentive to update to the newest Apple phone since 2019 when the iPhone 11 was released. Since then, we have seen no true innovation that makes people think, “I need to upgrade this year.”
While Apple’s partnership with OpenAI is positive, it was not enough. Many, including myself, opt to never use Siri because the program tends to activate randomly. Therefore, greater AI implementation into Siri was rather lackluster and did not meet the hype that many were hoping to be implemented into new IOS update.
Simply put, Apple is no longer the number one leader; that title now belongs to NVIDIA and second Microsoft.
The overall disappointment in Apple is not new but has been growing for quite some time. Apple is not innovative and never has been. They polish existing software and sell it at a premium price.
If this trend continues, I don't see Apple stock in the top 10 within the next 3-5 years. The stock has now pulled back from my pinpointed resistance at 196 and is back to the previous support at 193.
As far as levels go:
As I have previously shared, this 193 level is important LVN support. The current bid is now 192.3. If we open tomorrow and the price is still lingering around here, holding under 193, then I expect to see a continued sell-down into 190.
AMD
Another stock on our watch that sold off today was AMD. In our weekly plan, I had identified two key levels: 160 as support and 170 as resistance.
The stock opened with a gap down, briefly bounced, but then retraced back to the 160 support level, closing at 160.36. This makes it a very pivotal point for the stock. For three weeks, this level has attempted to hold, and if in tomorrow's session AMD breaches below 160, we can target a short position with a target of 153.
On the other hand, if this level continues to hold, it offers a great entry price. Should AMD remain above 160, we could see a bounce back to 165, with 161 as the confirmation level.
TSLA
The stock is in a very similar position to that of AMD. Current resistance is pinned at 180 and support at 174. In tomorrow's session, if this support level is breached, I can see a pullback down to 170. However, I will be watching to see if the price can trade back above 175. In this case, I can see it reaching 177.3.
My key levels tomorrow
With the stocks on my watchlist now addressed, I am still monitoring the /ES to see if the index can breach below the 5350 support level. Resistance remains at 5380. Based on current price action, and profile, I believe that until the CPI and FOMC releases on Wednesday, we may continue to see the /ES being bought up at the 5350 level.
Scenario 1: For this reason, I continue to watch for the /ES to breach below 5350. If and when it does, my target will be set at 5320.
Scenario 2: In tomorrow's session, I think we can continue to see selling pressure as we approach 5375-5380. If this resistance holds, I am looking for a pullback to 5360.
~Jay
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