Shares of technology giant Apple Inc. (NASDAQ:AAPL) rallied meaningfully after its earnings report Tuesday. And now, AAPL stock is well-positioned to push higher in the medium term, while quicker traders might be able to find opportunities on either side of the ball.
Apple earnings for its fiscal first quarter came to $3.06 per share, well above both analyst estimates of $2.60 and the $2.07 it earned in the same period a year ago. Revenues of $74.6 billion were a record high and handsomely beat analyst expectations for $67.69 billion.
Further good news was that gross margins widened to 39.9% compared to 37.9% a year ago. Also, sales outside of the U.S. made up 65% of the quarter’s revenue, in part due to a healthy pickup in demand from China.
The next likely area of focus will be the introduction into the sales cycle of the Apple Watch product, which some analyst already predict to be a big hit. Positive comments from analysts as well as activist investor Carl Icahn also helped sentiment in AAPL stay up after the earnings report.
AAPL Stock Charts
After the 5.65% rally in AAPL stock on Wednesday, the multiyear weekly chart remained bullish. Barring any sudden major outside force completely altering the picture, Apple looks well-positioned to push higher in the intermediate term.
The most recent important bigger-picture development (from a technical perspective) took place in the second half of October 2014, when AAPL pushed past diagonal resistance. Apple stock then topped in late November and has been consolidating above this previous resistance point (now support) ever since.
From this perspective, AAPL stock has important support around the $105 area that can’t be violated in a major way on a weekly closing basis if Apple is to remain in this bullish posture.
On the daily chart, we see that AAPL stock on Wednesday broke out of a consolidation range that has been shaping since mid-December. The range is well-defined and has good reference areas for active investors and traders to focus on.
Specifically, support near $105 also currently matches up with the rising 100-day simple moving average (blue line), which has held as support since spring 2014.
For active traders, it now bears watching to see how well AAPL stock can hold its up-gap from Wednesday. Specifically, if Apple were to fall below $114 in coming days, which is about the halfway mark of Wednesday’s up-gap, it could set up a short-side trade toward the $108 area (i.e., fading the post-earnings rally).
On the upside, should AAPL be able to get back above Wednesday’s highs around $118 in coming days, a follow-through buying trade toward $122-$123 as a first upside target area could set up.
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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.
