Apple’s shares have been consolidating since mid-February after they had run up post the December quarter results announced in January. Since then the shares have been fairly range bound between $122 and $133. The stock has gone through 4 other consolidation phases over the past 20 months after it had a double bottom at about $56 in April and June 2013 (see the chart below). It appears that Apple’s shares are either about to break to the upside and make new highs or hit resistance and trend back down. (Note that I own Apple shares and have sold Put options which is a bullish position).
Apple’s shares are being pulled higher by the iPhone doing extremely well, Macs continuing to gain share, another large buyback program and the Watch and Apple Pay showing that Tim Cook and Jony Ive can introduce what could be amazing new products or services. Carl Icahn’s letter that he thought the shares were worth $240 has had minimal impact on the shares. But I do believe that Apple could generate $50 billion in revenue in the June quarter, which is above the company’s guidance of $46 to $48 billion and the Street’s $48.3 billion.
On the flip side there are legitimate concerns surrounding iPhone compares later this year, iPhone’s recent market share declines, China Mobile’s slower 4G growth, Apple’s Watch middling along after a spike in initial orders and the iPad needing a new product jolt. However, it isn’t unusual for a stock to climb a wall of worry.
The stock needs to trade at a new high
It looks like Apple’s stock is poised to make a new high after trading between $122 and $133 for the past three months. They hit a closing high of $133.00 (intra-day high of $133.00) on February 23 and $132.65 (intra-day high of $134.54) on April 28. On Friday, May 22, the shares closed at $132.54 (intra-day high of $132.97).
The 50 day moving average line has flattened out and it isn’t providing much in support or resistance. However, it should once the stock has made a move higher or lower.
Or the rally could fade
If Apple’s shares don’t make a new high of at least a few dollars above $133 the double top from February and April should act as resistance. There are a number of technical sellers who will look at the chart and either get out of the shares, trim positions or sell the stock short. While this shouldn’t be a concern to investors it could create some short-term volatility.
The shares are in a bit of an over-bought condition when you look at the Relative Strength Index (RSI at the top third of the chart) and also at the Moving Average Convergence Divergence (MACD at the bottom third of the chart).
