Let's start with a
holdover from last week,
(AAPL - Get Report).
When we last checked in with Apple, the firm was testing resistance at $640 after pushing through two more intermediate resistance levels. $640 was a critical level for the stock -- it served as a major stumbling block for shares earlier this year when selling pressure from investors taking gains completely sapped any demand for shares and sent the stock lower. That's why it was such a big deal when Apple closed above $640 for the first time on Friday. That breakout was a buy signal for shares.
>>4 Stocks to Buy and Forget for 4 Years
For fundamental buy-and-hold investors, it may seem anti-intuitive to wait to buy a stock like Apple
it's gotten more expensive by moving through $640. But remember, $640 was a price where there'd previously been a glut of selling pressure. Until this stock could catch a bid above that price, the likeliest outcome of another test of $640 was a reversal lower as more sellers took gains. But buying this $640 breakout, investors have an opportunity to buy knowing that the glut of selling pressure has been absorbed by increasingly eager buyers.
The traders' mentality as simple as this: I'm happy to buy a stock when it gets more expensive, as long as it continues to get more expensive before I sell it. Apple fits that bill perfectly right now. If you decide to buy here, I'd recommend a
just below the
50-day moving average
Apple, which was featured yesterday in "
5 Tech Stocks Rising on Big Volume
," also shows up on a list of
4 Tech Stocks Set to Shine