I love Apple (AAPL) products, and I love Apple stock.  I mean, what’s not to love?  The company makes the best performing, best quality, and dare I say, “coolest” consumer electronic products out there.   And when it comes to the stock, what’s not to love about the 120%-plus return in the shares year to date?

On Monday, the company posted another stunning earnings beat, easily besting consensus forecasts on both bottom line earnings as well as top line revenues.  Judging by the after-hours trade on Monday, and again in Tuesday’s trade, this report is likely to help Apple keep adding to its year-to-date performance numbers.  Now, however, we have to start seriously addressing the question of whether the stock is too overextended and too overbought from a technical perspective.

One look at the chart here of AAPL tells the story of a winning stock that’s rode a virtual rocket ship higher since forming a bullish, double-bottom pattern that started with a November low, followed by a lower low in January.

The stock now trades above both its short-term, 50-day moving average (blue line), as well as the long-term, 200-day moving average (red line), but if you look at its path toward current levels you’ll see that it got there not via one big surge, but by a constant process of buyers steadily bidding the stock higher.  This tells me that the stock has more room to run.

However, if you look at the RSI figure we see a sign of danger.  The RSI, or Relative Strength Index, is a technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions.  A reading of 70 and above indicates a truly overbought equity. As you can see, the RSI on AAPL shares is now well above 70, and that means the stock could now be technically overbought.

However, I think that despite the big RSI spike in the shares on Tuesday, both the technical picture as well as the fundamental picture looks very healthy for Apple.  I think the stock can go much higher than it is right now, and I think AAPL is still a very strong buy.

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