Shares of technology giant Apple Inc. (NASDAQ:AAPL) rose by just about 2% on Monday. At least partly responsible for this rally was none other than billionaire investor Warren Buffett, who spoke positively about the stock and said his company bought more of AAPL stock in 2017. I continue to like this name through the longer-term lens but the near-term reward to risk on the upside has diminished notably as a result of the recent two-week rally.
When I last offered a trade idea on Apple stock in this here column on Feb. 6 I said that a long-side trade looks to have good reward to risk at the technical support juncture at the time for an initial bounce into the high $160s. This upside target was met last week and with yesterday’s rally the stock reached the high $170s and also an area of technical resistance.
As I always like to say when I discuss Apple stock, I like the name fundamentally as a mix of growth and value in good part due to customer loyalty and one of the world’s strongest brands. In my eye, the company has so far only just scratched the surface of what it can do to built out its ecosystem, which should remain a source of growth for many years to come.
Apple Stock Charts
Moving averages legend: red – 200 week, blue – 100 week, yellow – 50 week
On the multiyear weekly chart note that since my last update on AAPL stock on February 6th the stock has bounced strongly off the lower end of its up-trending channel (black parallels) and its yellow 50-week simple moving average. While the stock is not yet back at the very upper end of the channel, from a trading perspective the reward to risk on the long side is now notably worse than it was in early February.
Although this chart shouldn’t worry longer-term investors, more near-term oriented players may find that piling into fresh long-side trades here is not the ideal spot.
Moving averages legend: red – 200 day, blue – 100 day, yellow – 50 day
On the daily chart, we see that the recent rally off the February lows has also brought AAPL stock into an area of horizontal resistance in the high $170s, i.e. where the stock previously ran out of steam, from November 2017 through January 2018. Here too, while some further upside toward the mid to high $180s cannot be ruled out, reward-to-risk in my eye is decisively less attractive than it was a few weeks ago.
Traders who took long-side trades in early February may find this a good spot to take some near term profits rather than adding to fresh long side trading positions … at least in my eye.
Check out Anthony Mirhaydari’s Daily Market Outlook for Feb. 27.
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