A Better Way to Define “Bear Market”

On Friday, we looked at AMZN and highlighted upcoming support that must hold, or else the stock could be headed for bear market territory.

Today, we’re going to take at Apple, Inc. (AAPL), which is officially in bear market territory — at least by popular definition.

Let’s once again look at the definition of a bear market, as per Investopedia.com:

“Individual securities or commodities can also be considered to be in a bear market if they experience a decline of 20% or more over a sustained period of time — typically two months or more…”

Now, let’s do the math on AAPL according to those rules. AAPL’s 52-week high — seen just a few weeks ago — is $137.82. If we take 20% off that number, we get an official bear market level for AAPL of $110.25.

But really, does AAPL look like it’s in a bear market? Let’s check the daily chart and see:

While AAPL has had a 20% decline since hitting its highs, it’s still holding the trendline that started back in April.

Even if the trendline breaks, there’s a decent distance until it gets to the 200-day moving average.

The traditional definition is fine if you want to slap a label on, but it’s always good to check the charts to see the true story.

Trade Smart,

Michael Saul
Analyst, Chart of the Day

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