When investors set out in search of the perfect stock to own for the long term, they look for value as an important parameter. They also look for a sustainable advantage so that value doesn’t become a trap. And, ideally, they want a cooperative technical setup from the charts so they don’t buy at an inopportune time. Today, I present to you such a setup from Apple (NASDAQ:AAPL) stock.
But before I do and for better context of my bullishness on Apple stock now, I assure you that I am not an AAPL perma-bull. I am not a fan of Tim Cook and have been outspoken critic of his methods.
He has so far failed to wow us with anything new. If he needs to point out where the current innovation is, then it wasn’t that great.
But to the first point, AAPL stock still has a ton of value. It sells at a price-to-earnings ratio of 16, which is almost half of that of Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and nine times cheaper than Netflix (NASDAQ:NFLX). This makes the downside risk from owning Apple stock here much smaller than the general market. It will hold up better in the event of corrections.
Consensus on Wall Street is that AAPL has a sustainable advantage. And they have done it with massive margins. It seems that their clients love the product and price is never an issue. This is the dream customer to have.
Almost every expert I hear or read refers to the fact that they are stuck in the Apple eco system. I can’t relate, but then again, I am not an Apple client. I admit their products are slick but it’s a matter of taste and they are not for me. Nevertheless, AAPL has its hooks deep into its clientele and will be so for a long time.
I bet that the only thing that will be the iPhone killer is time itself. Until then, it’s an ATM machine.
So we’ve established that there is value and that we can have that linger for a long while. What would make this perfect is if we had a positive confirmation from the technical aspect … and we do.
The AAPL chart sports a technical scenario that suggests a potential rally into and through the next earnings report. It is important to note that it usually catches a bid into the event. So I often take early bullish bets that I exit or trim without needing to live through it.
I consider this trade setup a blend of tactical and fundamental nature so it has relatively high conviction. I want to go long AAPL stock now for what looks like an imminent spike in the coming weeks. The potential target for this breakout is $222 per share.
Bottom Line on Apple Stock
But there will be lines of resistance. The first two are close together at $196.70 and $197.80 per share. If the bulls can take them out then they would invite momentum buyers to fill the first gap at $202 per share. This process repeats itself to fill the higher gaps to $208 then $217, each having their own sets of resistance zone.
With the help of the positive sentiment in the general market, AAPL stock can do it. The only real short-term threat that I see is that Tim Cook is making too big a deal of its privacy integrity. This is like a popular restaurant making bold statements that they will never have a foodborne illness at their locations. The fact is that none are immune. So when he hangs so much on that, it becomes a major potential pitfall.
In short, Apple stock has value below, so it makes for a great long-term investment, even at these levels. But to make it even more attractive now, it also has a short-term scenario to be the icing on the cake. The only reason it would fall hard now would be because of a major flub from management or a major geopolitical hiccup. Neither of those scenarios is imminent at this point in time. So I hold my longs if I have them or I go long here.
Nicolas Chahine is the managing director of SellSpreads.com. As of this writing, he did not hold a position in any of the aforementioned securities. You can follow him as @racernic on Twitter and Stocktwits.