Shares of Apple (AAPL) have risen more than 20% since the company reported earnings in late April, making the stock just as exciting as its recent software reveals. However, while Apple stock remains well-positioned for the medium term, it might need a little pause in the shorter term.
It has been six weeks since my last take on Apple stock, and given AAPL’s sprint higher since — as well as yesterday’s developer’s conference — we’re plenty due for an update.
At its Worldwide Developers Conference, Apple showed a variety of new software features, including the new Mac OS X 10.10 (named “Yosemite”) and upgrades to iOS 8. CEO Tim Cook also updated the crowd on the sales front, when he said the company accumulated 130 million new users over the past 12 months. Still, the conference’s surprise factor was pretty low, with no new hardware to blow people’s minds.
Interestingly, the bullish rampage in Apple stock this time around is much more subdued than compared to the late stages of the summer/fall 2012 rally. This time around, the players are more institutional; the general investing public is more prone to flock to Apple when the company is in the midst of a new product cycle and routinely shows off new gear. The lack of any game-changing new product for AAPL in the near term is likely also keeping the public from going all-in on the stock.
All of this actually translates into more upside potential for the stock … just down the road.
Apple Stock Charts
In my last update on Apple stock, I discussed the important crossroads for the stock and laid out two scenarios: buying the stock above $550, or shorting/avoiding below $510. The resolution after Apple’s earnings announcement in late April was to the upside, so I bought into (and a little past) my upside target around $600. The post-earnings rally also sent Apple stock cleanly past the late-2012 diagonal resistance line, and that momentum move is still keeping the stock floating higher.
After the initial post-earnings rally, Apple stock began to consolidate for a few weeks, which then led to another push higher — the most recent one — into the mid-$600s. Given the big six-week run, it wasn’t surprising to see AAPL stock trade a little lower Monday during WWDC. A healthy amount of good news was already baked into shares.
From here, Apple stock would do well to consolidate the recent gains but stay above the $600-to-$610 area. My multimonth upside price target for AAPL is between $660 and $680.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.