Apple Still Has Near-Term Upside

By: Wayne Duggan

After an extremely volatile and unpredictable first half of 2016, Apple Inc. (NASDAQ: AAPL) seems to have definitively broken out to the upside. But with the stock now hitting new 2016 highs, how much upside is left?

The Bullish Signs

Apple has a number of bullish technical indicators going its way at the moment. First, the stock jumped above its long-term, downward-sloping resistance line back in August when it reported surprisingly strong Q2 earnings. Not only had that resistance line been in place for about a year, Apple’s subsequent dip to around $102 seems to confirm that the resistance line has now transitioned to support.

Next, technical traders are very familiar with the bullish golden cross – when a stock’s 50-day simple moving average (SMA) crosses above its 200-day SMA. In late August Apple experienced a golden cross for the first time since late 2013. Within two years of the last golden cross, Apple shares surged from the mid-$60s to new all-time highs above $130.

Finally, Apple’s September surge has the stock making its first higher short-term high since it peaked at $130.58 over a year ago. After making short-term highs of $129.60 in July 2015, $121.23 in November 2015, $111.11 in April 2016 and $110.23 in August 2016, Apple has now made its first higher short-term high in over a year.

Fundamental Fuel

Apple’s technical breakout is not coming out of thin air. The company recently unveiled the brand new iPhone 7 and iPhone 7 Plus. Although Apple doesn’t release any iPhone pre-sale numbers, mobile carriers T-Mobile US Inc (NASDAQ: TMUS) and Sprint Corp (NYSE: S) have already been bragging about iPhone 7 pre-orders shattering previous records. According to T-Mobile, iPhone 7 pre-orders are four times higher than the previous iPhone record. Sprint has also said preorders are up 375% compared to last year.

At the same time Apple’s stock is exploding to the upside, Apple’s primary smartphone competitor, SAMSUNG ELECTRONIC KRW5000 (OTCMKTS: SSNFL), is imploding. Samsung has issued a massive recall of its new Galaxy Note 7 devices after multiple reports of battery explosions and fires.

Levels To Watch

Apple traders seem to have technical indicators and fundamental news lining up perfectly at the moment, and the combo could mean that Apple still has significant room to the upside. A re-test of all-time highs of $130.50 could be coming at some point in the next year. In the meantime, last November’s high of $121 is the first major near-term technical resistance.

If Apple eventually breaks out to new all-time highs, it could be the beginning of another one of its huge multi-year runs like the one that took the stock from $60 to $130 from 2013 to 2015.

Disclosure: the author holds no position in the stocks mentioned.

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