Apple is testing key support levels ahead of earnings this week

Apple is testing several key levels of support ahead of its earnings report due out later this week.

The chart, at least over the course of the last week, isn't pretty. Apple just posted its worst week since last September amid a slew of bad news, like cautious analyst coverage of the iPhone maker.

On Monday, the stock fell nearly 2 percent as Nikkei reported Apple is cutting its iPhone production amid a fall in demand; the stock is now trading near key support levels.

First, the stock is testing its lows from November and December; a break below its current level would give the stock a "lower low." These lows are also where the trend line from the 2016 election comes in, so this is doubly important.

Second, we'd also point out that just below Monday's levels, at the $166.75 mark, is where the 100-day moving average comes in. That moving average has provided very solid support for the stock since the 2016 election, so whether it can hold that line or not in the coming days should prove quite important.

In the longer term, Apple has soared more than 73 percent in the last two years, so it's had a great run. Additionally, the stock is still well above its longer-term trend lines (and its 200-day moving average). Thus, if the name were to fall further from here, it would not be a severe move. Keep in mind, however, that a break below the 100-day moving average would change the stock's near-term trend.

Our research partner, Cascend Securities, just raised its price target from $200 to $220, and said the stock should be bought on this week's earnings report. The firm believes the Street is far too pessimistic about the iPhone, and sees strong results from services across the entire Apple ecosystem ... not simply the phones.

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