Why Apple Inc. Could Shoot 25% Higher (AAPL)

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If history really does repeat itself, Apple Inc. (AAPL) stock may be on the verge of a trade-worthy breakout.

AAPL stock takes flightBetter still, should this particular breakout take hold, with Apple shares still down 21% from its 2015’s triple-top level near $133, the upside potential is substantial.

The flipside, of course, is that AAPL stock is starting this bullish effort at a bit of a disadvantage, which may well come back to haunt it sooner or later.

Whatever the case, whether you’re a fan of Apple and shopping around for the right entry point or just looking for a near-term trading idea (and don’t care what it is), the current Apple stock chart is worth a closer look just for academic reasons.

A Pretty Good Cup-and-Handle

Ever heard of a cup-and-handle pattern? It’s an old-school idea, popularized at a time when the market wasn’t a complete roll of the dice and chart patterns still meant something. Thing is, this is one of those old-school ideas that’s still relevant because the underlying psychology hasn’t changed.

That psychology is, traders stand ready to create a healthy turnaround, but are waiting for that last piece of evidence that the turnaround is taking hold.

A cup-and-handle pattern looks like what it sounds like … a side/profile view of a coffee cup, with a handle jutting out to the latter side of it. AAPL stock has been developing one of these patterns since early this year, and as of Tuesday, it sealed the deal. Take a look.

AAPL stock, cup and handle pattern

The only real flaw with this particular cup and handle pattern is the brim line of the cup — the one on the left isn’t at the same level as the one on the right. Even so, the bullish thrust completing the outside of the handle has cleared either/both of those brim lines (red), completing the pattern and setting up a trade-worthy move.

There is one possible flaw with the cup-and-handle pattern Apple stock has just dished out, however.

While the bullish move that completed the handle broke above the brim line (as it needed to in order to get the rally going), it also left behind a gap between Monday’s high and Tuesday’s close. Broadly speaking, the market doesn’t like to leave gaps unfilled. It remains to be seen if investors will let this gap go.

Of course, just because traders tend to fill gaps in doesn’t mean AAPL will fill this one on right away. It could still happen weeks if not months from now.

Bigger-Picture Trading Range

While the cup-and-handle pattern is worth noting (even if only as an object lesson), it should be noted that the pattern has materialized within the confines of a much bigger and surprisingly well-defined trading range.

The chart below tells the tale. After bumping into a ceiling at $133 four times in the middle of last year, the bulls finally acquiesced and relinquished control to the bears …

AAPL stock support and resistance

… until the $92.50 turned into support. AAPL stock touched that support level three times since August (with two of those times being this year to make the cup portion of the cup-and-handle pattern) and ultimately used that floor as a springboard for the current breakout effort.

Assuming this trading range is still relevant — and it likely is — a revisit of $133 isn’t out of the question, even if Apple stock doesn’t get there in a perfectly straight line.

Bottom Line for AAPL Stock

While much of the media’s and investors’ focus on Apple of late has been on the chart, it should be noted that there’s also plenty of fundamental support for higher prices.

As of the latest look, AAPL stock is valued at a trailing price-to-earnings of 11.2 and a forward-looking one of 10.5. That’s downright cheap for a company of this caliber.

Apple on its worst day is still more investment-worthy than most other companies on their best day. The current bullish tide simply says the market is starting to remember that again.

Don’t fight the tape.

As of this writing, James Brumley did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2016/03/aapl-stock-apple-inc-25-percent-higher/.

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