by Serge Berger | December 24, 2013 8:51 am
On Monday, Dec. 23, Apple (AAPL) finally reached a multi-year deal with China Mobile Ltd to distribute its iPhones. Specifially, China Mobile plans on selling both the iPhone 5S and the cheaper 5C models in its retail stores starting Jan. 17. At the same time, Apple will also directly sell China Mobile-enabled iPhones in its retail stores.
On the back of this news, brokers quickly came out with comments, most of them positive. Wells Fargo Securities reiterated its Outperform rating on Apple, and Stifel Nicolaus raised its price target on Apple stock from $600 up to $650 while maintaining its Buy rating. Goldman Sachs also had positive things to say about the stock as it reiterated its “Buy” rating and a $620 price target.
As a result of the big news, AAPL stock rallied a solid 3.84% on the day, on volume of close to 18 million shares. The day’s ups in the stock also resulted in a break out of a multi-week consolidation period, which now likely puts the stock back in play for more upside.
Last Tuesday, I discussed how, given the continued lack of any meaningful upside push in recent weeks, traders in AAPL stock need to exercise more patience before again playing the long side of the stock with better odds. More specifically I said “AAPL stock is still consolidating its recent gains, and considering last week’s price action, I would now need to see a push past $565 to again be interested in trading the stock from the long side.”
With Monday’s rally, AAPL stock rallied past the $565 on a daily closing basis, and gapped above this level at the open, never looking back intra-day, in a strong statement on the part of the bulls.
If we look closely on the daily chart of AAPL stock below, we note that last Wednesday it left a strong hammer handle with a long tail behind on its daily chart. This was followed by two indecision days where the stock hardly moved, and finally confirmed with Monday’s bullish breakaway rally.
This type of pattern — with bears capitulating, followed by indecision/consolidation, and an eventual powerful rally — makes for probability swing trades on the long side.
From here, with upside momentum back in AAPL stock, a next target between $580 and $590 opens up, while last week’s lows around $538 is good support.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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