Here's When You Should Buy Apple

Apple remains near a very low-risk buy zone as the 2016 bottoming process strengthens.
By Gary Morrow ,

Shares of Apple (AAPL) - Get Report are continuing to base above a major support zone. After rebounding off this area in mid-May, the stock ran out of momentum as it began to pierce the $100 area. Late last month this support area was tested once again, and as a new month gets underway, Apple is holding up well.

For patient investors, the stock remains near a very low-risk buy zone as the 2016 bottoming process strengthens.

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At the January/February lows, Apple managed to hold key support near the August 2015 spike low. The stock mounted a sharp rally off the $92 area, and by early April, after gaining just over 20%, it had returned to the 200-moving average. Apple was turned away after battling heavy resistance near this long-term indicator, and by April 18, it was in full breakdown mode. The stock was under massive downside pressure but was still able to regain its footing in early May near the initial 2016 lows. By the second half of the month, Apple was back to rally mode.

Late last month, Apple reached the $92 area once again. The stock has bounced a bit in early July but remains fairly close to the support zone. In the near term, Apple investors should consider the stock a low-risk buy between $94 and $92. This important support area includes the stock's 40-week moving average. On the downside, a close back below the June low of $91.50 would indicate that more bottoming action is ahead before a significant recovery rally can begin.

Of note, Apple is scheduled to report its third-quarter results on July 26.

From a fundamental perspective, Apple is a holding in Jim Cramer's Action Alerts PLUS charitable portfolio. Cramer and Research Director Jack Mohr recently wrote in reference to Apple's reported intrest in Jay-Z's Tidal music streaming service:

At its core, we believe this type of acquisition would mainly be about the talent pool, as the price would likely be minimal (compared to Apple's overall cash balance -- Jay-Z originally bought the service for $56 million in 2015) and the increasing fragmentation of the music industry puts a premium on having exclusivity to popular talents such as Jay-Z and Beyonce. That being said, we would also like to see Apple improve the service organically, with its own special brand touch that consumers have learned to love over the years. Either way, we will continue to follow this story and still believe the Services business is undervalued by the market for its long-term potential."

Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long AAPL.

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