Trading Nation

Apple shows bearish sign ahead of earnings: Technician

How to trade Apple ahead of earnings

Apple is scheduled to report third-quarter earnings on Tuesday after the bell, and according to one technician, the charts are showing bearish signs for the stock.

Rich Ross of Evercore ISI said while Apple's charts are notoriously hard to read ahead of earnings, he would be betting on a slide for the stock after the company reports.

"I would imagine a big surprise this time would likely be to the downside. And that's based upon the fact that the stock is lagging here," Ross said Monday on CNBC's "Trading Nation." "Technology has been leading stocks higher but Apple, the general, not so much."

On Monday, the Nasdaq 100 index which is largely composed of big tech names, climbed within 1.6 percent of its all-time bubble record. Meanwhile, shares of Apple slid more than 3 percent.

Read MoreBad omen for Apple report as supplier shares sink

Ross said that while Apple has broken above its 50-day moving average, it still hasn't hit its 200-day moving average and will run into resistance around $122.

"That relative underperformance for Apple is really a bearish divergence for the stock as you head into earnings," Ross said.

However, Erin Gibbs of S&P Investment Advisory Services said that the stock's valuation looks relatively cheap and could make Apple a buy.

"We haven't seen it trade this cheap since early 2014," Gibbs said, with the stock trading at 12.5 times forward earnings.

And while Gibbs expects Apple to beat analyst expectations in its latest report, she said investors will be watching closely for guidance on iPhone 6S sales and how that could impact future growth.

"They've beaten for the past 11 consecutive quarters, so it is expected that they beat once again," she said Monday.

Disclosure: Apple is held in model portfolios advised by Erin Gibbs. Neither Gibbs nor her immediate family has a position in the stock.

Want to be a part of the Trading Nation? If you'd like to call into our live Wednesday show, email your name, number and a question to