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TheStreet Open House

Apple Has Its Swagger Back

Stocks in this article: AAPLCHLQQQ

NEW YORK (TheStreet) -- Even with the new S&P 500 highs, the previous four and a half trading sessions were pretty quiet during the holiday-shortened week. 

But one stock stuck out: Apple (AAPL)

Since the company reported its fiscal fourth-quarter earnings in late October, shares of Apple had largely remained unchanged. From Oct. 21 through last Monday, Nov. 25, the stock traded in a range of $512.50 to $533. 

For a company that just reported strong earnings and introduced four new products -- the iPhone 5S, iPhone 5C, iPad Air and iPad Mini -- the sluggish price action was surprising, considering we've seen one of the stronger bull markets in recent history. 

On Tuesday, that all changed. Technicians, along with myself, were looking for a breakout over the $525 to $530 level and boy did we get it. To me, it was a more of a when, not if, scenario because of the holiday season.

The iPhone 5S production is being run full tilt, as holiday sales are expected to be strong. Many investors are also looking for a deal with China Mobile Limited (CHL) to boost sales in Asia, with China Mobile's more than 750 million subscribers. 

Consumers can't easily describe how the iPad Air differs from, or is much better than, the current iPad. TheStreet's Rocco Pendola described that in a recent CNBC appearance below.  

The stock closed Friday's short session at $556, after opening at $524 on Tuesday. That's a relatively big move, and I don't know that it's quite done over the intermediate term. I wouldn't be shocked to see a $600 price tag or higher going into earnings later in January.

But don't chase it. 

Sounds crazy, right? First, I said it could hit $600 in six weeks, and then I said not to buy it. What gives? 

Sure, the stock could very well be bid up into the holidays, along with shares of retailers and the rest of the market. But if you missed the breakout from $525 to $555, don't be that guy buying the stock while others are taking profits. 

The bulk of the short-term move has been captured; now all that's left over is the scraps. Let me put it to you this way: Thanksgiving was the breakout and there was plenty to eat for everyone at the dinner. For the next couple of days, there were enough leftovers for everyone to still be happy. But by the time you make it to Monday, all that remains are the scraps that nobody wanted to eat. 

Apple is technically overbought, with an RSI of 73. But that can easily run above 80 and even higher, especially when investors aren't thinking clearly. 

Don't let that trick you. The stock will do one of two things: Either it pulls back and goes lower on profit-taking, or it consolidates in a sideways pattern until buyers push it higher again. 

One of those two things needs to happen first before any more significant upside will occur. I'm just trying to help investors looking to get in, as much as I'd like to watch the stock fly higher and higher every day. 

If you missed the boat this far, I'm sorry. But there will be more to come. A strong quarter is almost certain; the only question is, how strong? A deal with China Mobile would give the stock a boost and would be a big relief to shareholders who have been waiting for a while to get it. 

Finally, a new product could really give Apple it's mojo back in 2014, especially if it's riding high on strong iPad and iPhone sales. Just be cautious when you're buying after the breakout has occurred. 

From a risk standpoint, it makes sense to hold off for a bit. The PowerShares QQQ Trust (QQQ), which essentially tracks the Nasdaq, is also overbought on a technical basis. 

In other words, everything is due for a slight pullback and it would be better to see if Apple can find support in the $550 to $555 area, or if it will pull back to its eight-day or 21-day simple moving average.

I am not perfect by any means, but am just trying to give prospective buyers a reality check and save them from getting caught up in the hype. 

At the time of publication, the author was long Apple and QQQ. 

-- Written by Bret Kenwell in Petoskey, Mich.

Bret Kenwell currently writes, blogs and also contributes to Robert Weinstein's Weekly Options Newsletter. Focuses on short-to-intermediate-term trading opportunities that can be exposed via options. He prefers to use debit trades on momentum setups and credit trades on support/resistance setups. He also focuses on building long-term wealth by searching for consistent, quality dividend paying companies and long-term growth companies. He considers himself the surfer, not the wave, in relation to the market and himself. He has no allegiance to either the bull side or the bear side.

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