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A Tough Test For Tech

|Includes:Apple Inc. (AAPL), AMZN, BIDU, INTC, JNPR, LXK

Stocks managed to close with slight gains Monday, but for a change, the Dow Industrials lagged up just 0.14%, which was one-third the 0.47% gain in the S&P 500. The market internals were clearly positive but leading the market was the Nasdaq 100, which was up over 1%.

Asian markets were hit hard overnight with over a 2.5% loss in the Shanghai Composite but the Euro markets are so far ignoring the losses in Asia as they are up nicely. The focus this week is on the tech sector as the much weaker than expected earnings from International Business Machines (IBM) shocked many analysts.

On the other hand, the earnings from Microsoft Corp. (MSFT) were a positive surprise as its stock has gained over 7% in the past two days. Today the focus will be on Apple, Inc. (AAPL), who along with AT&T (T), reports after the close.

There are a number of tech companies reporting this week including Juniper Networks, Inc. (JNPR), which reports after the close today, while Lexmark International, Inc. (LXK) reports before the opening. Later in the week, we have, Inc. (AMZN) and Chinese internet giant Baidu, Inc. (BIDU).

Oftentimes, the technical studies can alert investors and traders to post-earnings shocks and the technical outlook for Apple, Inc. (AAPL) and two other tech stocks could help set the tone for this week's trading.

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Chart Analysis: The weekly chart of Apple, Inc. (AAPL) shows that an LCD was triggered one week after AAPL made its high last September.

  • AAPL close below its 20-week EMA the week ending October 20 as the decline picked up momentum.
  • The weekly starc- band was tested for two consecutive weeks in early November before AAPL rebounded for two weeks.
  • The stock is down over 44% from its highs and is testing the major 50% Fibonacci support from the 2008 lows at $391.64.
  • The 61.8% support level is at $347.566, which corresponds to the lows from early 2011.
  • The weekly relative performance broke its uptrend, line a, in October and has continued to make lower lows.
  • The weekly OBV did make new highs with prices, line b, in September, which was misleading.
  • The OBV dropped below its WMA in the middle of October but reached long-term support, line c, in March.
  • The volume was high on last week's decline so a sharply higher close on higher volume is needed to turn the OBV around.

The daily chart of Apple, Inc. (AAPL) shows the break of support, line d, in the $420 area last week.

  • AAPL has been testing its daily starc- band over the past few days, which reflects its short-term oversold status.
  • The daily OBV dropped below its support, line f, last week so the multiple time frame OBV analysis is negative.
  • AAPL dropped below its quarterly pivot in late October 2012 and has been below its quarterly pivot line ever since.
  • There is resistance now at $420 and then $437 with the quarterly pivot at $465.86

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Juniper Networks Inc. (JNPR) is an $8.72 billion developer of network and communication devices that peaked in February at $22.98.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.