Despite Big Tech's massively robust quarterly performance, bearish pressure on the Nasdaq Composite keeps mounting on supply concerns brought about by the pandemic. Have a look at our comprehensive analysis of the index to read about the current opportunities for contrarian trading.
Apple just had one of its best quarters on record, absolutely devastating Wall Street's earnings expectations. Even still, the share price faltered in after-hours trading on iPhone chip supply warnings.
The supply bottlenecks that Jerome Powell warned against during FED's June meeting persist owing to the evolving pandemic conditions. Similar supply concerns were observed in Tesla's earnings report on Monday; however, the electric vehicle manufacturer said that the impact was not detrimental.
The share price took a dive yesterday, falling more than 3 dollars in the after-hours trading. This means that today's session would open with a gap, as shown on the 4H chart above.
The gap would still be above the 23.6 per cent Fibonacci retracement level at 143.48, meaning that bears should not hold big hopes for a deeper correction. This is further bolstered by the fact that the 50-day MA (in green) is about to converge with the 23.6 per cent Fibonacci.
The market is likely to price in the supply concerns relatively quickly, making a potential rebound from 143.48 seem very plausible. If the price action remains concentrated above the 23.6 per cent Fibonacci, this would likely result in the development of a Pennant.
Pennants are a type of trend continuation pattern that typically implies that the underlying market sentiment is preserved. Hence, bulls would have a chance to go long on the condition that the share price consolidates in the short term.
If, however, the share price breaks down below 143.48, the correction could then bottom out at the 38.2 per cent Fibonacci retracement level at 139.44. The latter is about to be crossed by the 100-day MA (in blue).
Apple posted earnings per share (EPS) of $1.30 vs $1.01 that were initially forecasted. Revenue was reported at $81.41 billion, shooting past the preliminary estimations of $73.30 billion.
Tim Cook, Apple's CEO, commented on the quarterly performance:
"This quarter, our teams built on a period of unmatched innovation by sharing powerful new products with our users, at a time when using technology to connect people everywhere has never been more important."