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Can Apple's brand appeal overcome economic hurdles like falling consumer confidence, supply chain issues in China and higher prices? 

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Where things stand

Two issues could weigh on Apple's earnings this time around: 

1) The company's relatively large exposure to China which saw a significant impact on retail sales due to rolling lockdowns over the last quarter; 

2) This is the third fiscal quarter for Apple when sales normally are lower as retailers get ready for the large, holiday-driven orders seen in September and October.

Just recently China announced another lockdown in Wuhan in an effort to control the virus. Apple doesn't have production facilities there, but it underscores the risk of a lockdown in Shenzhen, where Apple's largest supplier is located. 

Getting into the numbers

Apple already said that between $4-8B of its revenue could be trimmed because of supply problems, so traders are going to be interested to see if that number is increased in light of the current situation. Although Deutsche Bank thinks that Apple has done a better job than expected in managing its supply chain and that no further cuts to revenue outlook might be necessary. 

Given the effect of inflation on people's wallets, the likely focus will be to see if there is any push-back from consumers on paying for the pricier Apple products. Particularly volume data could move investor sentiment. Since the start of the pandemic, Apple has not provided guidance, and that's expected to be the theme when it reports later today.

Earnings are forecast at $1.16 per share on sales of $82.8B

APPLe nears critical point

The share price of Apple has either bottomed at $129 or is correcting the downward leg in a bear market rally. 

The descending diagonal off the highs of $183 can be seen as both leading or correcting, and the 200-day average will provide further clarity on that.The SMA and the median trendline of the $116/129 – $183 regression channel meet around $160, the most critical near-term level to keep an eye on going up. 

If the cluster of resistance holds, the price could pull back to the 50-day average of $144. Below there, $129 and $116 are supports. Further upside could lead APPLE past $160, to $178, and eventually the high of $183.

A MACD in positive territory and no indication of a short-term slowdown would imply the price has room to move further to the upside

Key Takeaways

The end of the third fiscal quarter is expected to be a bit of a challenge for Apple due to supply shortage concerns led by China’s crackdown on the spread of the virus and behavioral consumer patterns ahead of Q4. 

Apple has said that it will cut a significant amount of revenue due to supply problems, so, investors will be mindful of further revenue cuts when the company reports today. They will also observe how people respond to the price increase of Apple products.