Wait to Buy Apple Stock: $160 Is the Magic Number

AAPL stock - Wait to Buy Apple Stock: $160 Is the Magic Number

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Apple (NASDAQ:AAPL) continues to be remain rangebound this year. AAPL stock has traded for the most part between $160 and $180 for all of 2022. Use these levels as entry and exit points as both the fundamentals and technicals point to continued consolidation. Patience will payoff with a more attractive purchase price for Apple.

Valuations still remain at historic extremes for AAPL stock. Price/Sales is currently at a rather rich 7.37x. This is twice the median level of 3.53x over the past decade. It will be difficult for Apple to continue to grow at the same pace to justify these lofty multiples given the 2.78 trillion dollar market capitalization. The law of large numbers applies here.

Rising interest rates will be a serious headwind for stocks generally and NASDAQ names in particular. Rich valuations are much easier to justify with the 10-year yield below 1%. It will be a challenge to maintain these multiples now that the 10-year yield is nearing 3%. Higher rates also have a negative effect on input costs that will crimp profit margins going forward.

The technicals all point to lower levels for AAPL stock. Shares were firmly rejected at the $180 area once again. Apple is poised to break below the widely followed 20-day moving average at $170. MACD just generated a sell signal. There is major downside support at $160 which equates to the buy point.

Investors looking to add AAPL stock to their portfolio should be patient and wait for lower levels to buy. This is especially true given the near-term bearish technical and fundamental outlook for Apple shares.

Option traders can get paid for their patience by selling the $160 strike puts. For example, the May $160 puts are currently priced around $4 per contract. Selling these puts would bring in $400 for each put sold. It would also position the seller of these puts to be a buyer of AAPL stock at the $160 support area.

On the date of publication, Tim Biggam did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Tim spent 13 years as Chief Options Strategist at Man Securities in Chicago, four years as Lead Options Strategist at ThinkorSwim and three years as a Market Maker for First Options in Chicago. Tim makes weekly appearances on Bloomberg TV  “Options Insight”, Business First AM “Trader Talk”, TD Ameritade Network “Morning Trade Live” and CBOE-TV “Vol 411” to discuss everything from volatility and option related.


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