AAPL: Why Apple Stock Is Ready For a Breakout

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Shares of Apple Inc. (NASDAQ:AAPL ) have been on fire since the iPhone maker demolished fiscal first-quarter revenue and earnings estimates on Jan. 27. And when factoring its 2015 low of $104.63 on Jan. 6, Apple stock has posted more than 13% gains over the past month. Take a look at the chart.

AAPL: Why Apple Stock Is Ready For a Breakout

Investors who bailed on Apple stock at $104.63 on fears that the shares were heading to $100 are deservedly kicking themselves.

Apple stock closed Wednesday at $119.56, up 0.8%. The shares are now up more than 8% this year, beating both the Dow Jones Industrial Average and the S&P 500, which are both down 0.8%. What’s more important to consider, though, is that Apple stock has broken a key resistance level, suggesting these shares have more room to run.

On Wednesday, the stock smashed through $120 per share, its prior 52-week/all-time high on its way to new all-time high at $120.51. While Apple stock did close 0.8% lower to $119.56, the movement had already given traders the sign they were looking for.

Apple stock cleared a flat base at around $119.85 — an important benchmark and buy point target, signaling breakout potential.

As noted, Apple stock had broken out to an incredible run over the past month. But these runs won’t last forever until there is some consolidation. An example of this was when the stock first reached its all-time high of $120 on Jan. 30. Apple stock then fell more than 3% in the next session due to some profit-taking — and that was a good thing for the stock, especially since Apple stock bounced off the Monday’s $116.08 low and climbed back to $119.17 the next session.

In other words, Apple stock was creating a base or a foundation, validating that its breakout potential was real. Once $119.85 was broken Wednesday, which is crucial for the next uptrend, there is now a sense that not only is the breakout sustainable for Apple stock, it is not as risky as if there was no consolidation.

Apple Stock: What Next?

That’s the most important question at this point. The good thing is, for investors, there is no wrong time to get into Apple stock, which has a consensus “Buy” rating and an average 12-month price target of $165, suggesting gains of almost 40% from current levels.

For traders, however, the price Apple stock reaches will matter based on your time frame. So with the stock at around $119/$120, Apple stock is trading almost 70% above its 52-week low. It seems like a lot, but the shares are only 6% above their 50-day moving average.

Ordinarily, I’d feel more comfortable with double-digit percentage points above the 50-day. But Apple stock, after its blowout quarter, is no ordinary equity.

Institutions are piling in. And if they’re not, they will. This is because Apple’s bond sale — presumably — to buy back shares and hike its dividend are going to be both short-term and long-term catalysts for the stock. This means there is potentially more risk not holding Apple stock than there is holding them, given Apple’s monster quarter and recent market share gains.

Then there’s the announced April launch date of its highly-anticipated Apple Watch, which some critics are saying “it must be a game-changer or else.”

All told, $135 to $140 seems like a realistic target by the end of March, representing a 12% to 16% move. Consider that Apple stock has already moved 10% in only six trading sessions. And after breaking through its base and justifying its breakout potential, investors not biting into Apple stock are foolish.

At this writing, Richard Saintvilus held shares of AAPL.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/02/aapl-apple-stock-ready-breakout/.

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