Is Apple Stock a Breakout Buy? A Look at the Charts

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Apple (NASDAQ:AAPL) shares spent last week hitting new highs, but not in the explosively bullish way many investors were hoping. Instead, AAPL stock has cautiously crept higher, hitting new highs along the way.

Is Apple Stock a Breakout Buy? A Look at the Charts
Source: pio3 / Shutterstock.com

With the broader market holding up, Apple stock price has a better chance of continuing higher.

As well, with trade talks between the U.S. and China making some progress, investors have to be careful for how it could impact stocks. Negative developments between the two sides will almost surely hurt the market. Given how these talks have progressed in the past, it’s possible they don’t work out well.

Apple’s Particular China Pain

For Apple stock, the trade wars have been extra frustrating. Forget for a moment that Apple does considerable business in both countries and has production in China. When Apple reported earnings in late April and late July, both reports beat expectations. Guidance was better than expected and investors cheered the results.

Then the trade war escalated and Apple’s post-earnings gains suddenly disappeared. It doesn’t take long to realize that, despite two great quarters, Apple stock hadn’t really gone anywhere as early September approached.

Now though, shares are starting to move higher and if momentum continues, more new highs could be on the way.

Trading Apple Stock

chart of Apple stock
Click to Enlarge
Source: Chart courtesy of StockCharts.com

Before we looked at the charts, I wanted to get that bit on the trade-war front covered. That’s because those events have set up an important mark on the daily chart above. Check out the two purple arrows above, both highlighting how Apple failed to hold the $215 mark on each occasions.

The stock was finally able to breakout over this mark in September, but more importantly, it held as support. That test came about a month later after AAPL stock fell to $215.13 before reversing higher and closing above the 50-day moving average and uptrend support (blue line).

Bulls have since seen AAPL stock press even higher, now north of $230. That put it above its former adjusted high of $229.92. Many charts, such as the one above, operate on a dividend-adjusted basis. In that sense, Apple stock had a high of $229.90 coming into the month.

On an unadjusted basis, the stock’s high sat up near $233.40. That becomes the next upside target, while a run into the low-$240s up to channel resistance is possible beyond that.

On the downside, investors need to watch for a pullback down to channel support and the 20-day moving average. Below that puts the 50-day moving average on the table, with another possible test of $215 below that.

Technically speaking, the charts look great for Apple stock. If the broader market can stay afloat this quarter, AAPL may forge even higher going into year-end. Also, iPhone demand appears strong and sentiment is turning bullish.

Most importantly though, the price action remains bullish. Even amid the volatility over the last few months, Apple has been a leader. Given its size and relevance, that’s an important development in this environment.

Bottom Line on AAPL Stock

When mega-cap tech names like AAPL stock, Microsoft (NASDAQ:MSFT) and others are holding up in the face of market-wide volatility, it sends a sign to investors that perhaps they can be viewed as beacons of stability.

That theory doesn’t always hold water, but it provides clues to the stock’s price action. In the case of the Apple stock price, its reversal earlier this month off the breakout level — which was highlighted in InvestorPlace’s Top Stock Trades — was a great opportunity for investors to get long.

Now we’re seeing one of the market’s biggest names with immense cash flow and a reasonable valuation trading in a bullish manner ahead of its biggest revenue quarter. New products and platforms are being rolled out to fuel Services revenue.

If the overall market holds up and/or trades higher, AAPL stock should continue higher too.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell. As of this writing, Bret Kenwell is long AAPL.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.


Article printed from InvestorPlace Media, https://investorplace.com/2019/10/is-apple-stock-a-breakout-buy-a-look-at-the-charts/.

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