With Apple Inc.’s stock coming off its poorest quarterly performance relative to the S&P 500 Index in over a decade, traders are looking for signs that the worst may be over.

The 12 per cent drop since the start of the year paid off for short sellers, giving them an incentive to unwind their bets. Technical analysts say the stock is flirting with levels where dip-buyers are likely to swoop in. And the lagging run may make Apple look cheap compared with the other big tech companies. 

“Nobody wants to sell anymore of their Apple positions because there’s a dividend, big share buybacks and no one wants to pay capital-gains taxes on it,” said Craig Johnson, chief market technician at Piper Sandler & Co. “I don’t see the stock falling much further from here. The bigger risk is that Apple’s stock may be stuck in a range between $165 to $200 until it can decisively break above its longer-term moving averages.”

Apple shares fell about 1 per cent in early Tuesday trading.

Read more: Apple Without AI Looks More Like Coca-Cola Than High-Growth Tech

The slide has erased more than $300 billion in market value this year, ceding Apple’s status as the most-valuable US company to Microsoft Corp. The drop was spurred by declining sales in China, regulatory scrutiny of its App store, and mounting concern among investors about its growth outlook. 

As the S&P 500 gained, Apple’s return lagged it by 21 percentage points in the first quarter, the worst showing by that measure since 2013, according to data compiled by Bloomberg. 

But the loss has been steep enough that it’s nearing a key support level at $165, the low it hit in October, when the broader market also bottomed out. 

Apple shares briefly traded for less than $170 at various points in recent sessions. Breaking below that level and holding there could presage a pullback to its October low of $165.67. It ended Monday at $170.03.

Short sellers pounced on Apple as peers like Nvidia Corp., Meta Platforms Inc. and Amazon.com Inc. kept rallying. Apple is the second-most profitable short position this year at $2.4 billion in paper profits, according to data-analytics firm S3 Partners. That may give them some incentive to unwind the positions, and while the size of open short positions hasn’t changed much, they’re down from levels seen last year.

With Apple faltering, traders are growing concerned that tech shares may face pressure in the coming months — even with Nvidia’s dominance. The stock continues to set new lows relative to the $260 billion Invesco QQQ Trust Series 1, ticker QQQ, which tracks the Nasdaq 100 Index. That suggests a momentum divergence has formed in the tech sector versus the broader market, with weakness emerging underneath the surface for growth shares.

That said, Apple traditionally serves as a flight-to-safety trade due to its strong business model and cash generation. Despite challenges in China, Apple’s massive buyback plans mean its shares continue to have upside potential for long-term money managers, according to Nancy Tengler, chief executive officer at Laffer Tengler Investments Inc.

While anxiety is building over how long the artificial intelligence euphoria can last following Nvidia’s over 80 per cent surge in 2024, Apple shouldn’t be a drag on the S&P 500 unless it breaks its multi-year uptrend from its 2020 lows, according to Mark Newton, head of technical strategy at Fundstrat Global Advisors. 

If other tech stocks stumble, Piper’s Johnson says it may even spur a rotation back into Apple.

“If traders sell Nvidia, will they buy Apple instead? I hear it constantly from clients,” he said. “Investors love swapping one Magnificent Seven stock for another.”