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Is Apple Stock a good Buy?

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Apple is the largest US Company by market capital. Apple is also a component of Dow jones index and S&P 500 index. Apple stock price $105 seems very attractive from valuation aspects and Apple  has relatively good valuation in comparison to stocks of the same group. Apple released a new IPhone and consumer will get it at the end of March.   Value investors and institutional investors should consider apple  a good opportunity to buy stock and make it part of their portfolio. But recent price action of apple stock seems to different what is expected.  Let’s look at the recent price action of apple stock.

 

Apple stock  chart  sto last major down leg started from $120 in December 2015 and got support at $92 area in January 2016, exactly the same area  of august 24, 2015  apple ‘s low price. Apple stock began to move up from the end of February 2016 and price moved up to $107, which was long time support line for apple and now turn a resistance line for the stock. This $105 to $108 resistance line zone also has the 100 day simple moving average line.  Even though apple crossed the 100 day simple moving average, apple failed to closed and hold above 100 day simple moving average.

Len Stock Chart Daily
Len Stock Chart Daily

Source: Free stockcharts.com

Interestingly, Apple Stock price from 10$5 to $108  zone area is also the Fibonacci 50 % retracement zone from its major down leg that started in December 2015. Apple   released its iPhone SE version this month and phone will available for the consumer from March 31 2016.  IPhone SE failure to achieve expected result could be a dead cat bounce for the apple stock.  Ideal place for stock dead cat bounce is the 50 percent retracement of the previous down move and apple price is exactly on the same area.

Another weakness of the latest upward move is volume  was very low and barely touched 50 day moving average once or twice in the whole move. Volume is low in the upward move means institutional investors are not interested in the stock in its upward move.

Apple stock Chart
Apple stock Chart Rounding top with Doji

Source: Free stockcharts.com

Apple stock chart is forming a rounding top at the high of the current move. This also indicates bull lost its strength to move up further or bear is trying to take control of the move. A doji is appeared at the top of the current move.  Doji is famous for calling the market tops or stock tops that signals the reverse of the current up trend. That’s why doji is also known as magic doji.  Apple stock ‘s close below  $105  may lead to apple price again $92  support line and most of its depends on apple new product  IPhone SE.

apple stock Weekly chart
apple stock Weekly chart

Source: Free stockcharts.com

From Apple stock  weekly chart, apple long term upward trend line is broken in august 2015 as price failed to hold above the $120 area. Apple made second minor upward trend line from august 2015 to December 2015. But this minor upward trend line is also broke as price failed to stay above $115 area. In the recent upward move, apple made an upward trend but this is only 50 percent of the previous down leg, which makes apple a possible   dead cat bounce candidate.

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Apple stock chart broke the rounding top doji pattern and also the 50 % Fibonacci retracement level. This is a good news for the investors who are holding the apple and expect buying stock more to increase their portfolio share on this stock. Right now stock trades at close to $110 and last week stock closed just below $110( 109.99).  However, stock next resistance level 200 day moving average is 112 and right now stock is trading at the 62 percent of the Fibonacci resistance level. That could be another resistance level.

Apple StockChart
Apple StockChart

One point is relevant to mention that even though apple stock is breaking key resistance line in the short term time scale, we did not see big price jump on apple stock after the new product launch. Apple volume did not pick up as apple price is moving higher what was very expected because of its new product launch. Big volume breakout for new product could prove to the market that investors’ confidence is high to the stock.

However, current apple price movement indicates that investors are buying stock with caution, not from exuberance. From fundamental view, apple stock is super buy because of its very low P/E ratio and more than $200 billion cash in hand. Apple stock is still down 18 percent from its all-time high price $134 whereas market indexes S&P 500  and Dow Jones index are  very close to  their all-time high.  Apple stock has to prove lot in order to regain its all loss and make  again a new high. May be next earning could be a good test for the apple to prove this.

 

 

 

Disclosure: This article is for entertainment purposes only. Author has  no position in mentioned stock.

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