Since my mid-November take on Apple (AAPL), Apple stock has staged the breakout that I wrote about and thus completed its next upswing. I ended my note with the following:
“All in all, while Apple is still trading in a constructive pattern, I don’t want to chase it higher just yet. I’m waiting for a break above $528 before adding to my long position.”
Fast forward to last Tuesday, and we received this breakout above $528 as AAPL shares rallied close to 1.8% on good volume. From Tuesday through today, Apple is up nearly 6%.
This most recent move in Apple stock was news-driven. Last Tuesday, Apple received a patent award for a camera system using a micro-lens adaptor that allows users to refocus on an image after the initial shot. Every time Apple gets awarded a new patent, investors should take notice — it could be a product component for the next big thing.
Also last week, product assembling company Hon Hai, a.k.a. Foxconn, was reported to have increased production capacity for the iPhone 5S while cutting back production of the cheaper iPhone 5C, which at the margin as is simply good news. The Taiwan-based Foxconn has more than 1 million workers in China and operates 100 production lines around the clock in Zhengzhou, a city in north central China. One statistic that I find amazing: Foxconn is reported to have nearly 300,000 workers in Zhengzhou that are focused on making the AAPL iPhone 5S.
But, we’re here to talk about the chart of Apple stock, not phones and workers.
Note how AAPL, off its double bottom from earlier this past summer, began to respect its technicals again in a better way. Last week’s breakout of the bullish pennant pattern also pushed Apple stock above its 21-day moving average (yellow line), which was a double confirmation that an upside momentum swing would take place.
At this stage, the move has happened, and I am once again lightening up on my long exposure to AAPL.
On the weekly chart below, note that with last week’s breakout, AAPL also broke past the 50% Fibonacci retracement line from the entire selloff that began in September 2012.
Through this lens, I believe Apple stock has a shot to reach the $580 area in the medium term, which is the 61.8% Fibonacci retracement area of the downswing.
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.