Who Cares if Apple Builds a Car? The Stock Is Breaking Out

Apple trades higher on reports the company is making headway on its automotive efforts.
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Apple  (AAPL) - Get Report burst to its highest level since early September on Tuesday following excitement over the company’s automotive aspirations.

Shares were up about 2.75% on the day, but had risen as much as 4.8% on Tuesday. That followed Monday’s 1.2% gain after a late-session reversal.

Chatter picked up pace near Monday’s close regarding the company’s automotive efforts.

Reports suggested Apple could begin producing vehicles in 2024, using its self-driving technology and reported “breakthrough” battery technology.

To no surprise, the news isn’t doing Tesla  (TSLA) - Get Report any favors, with shares down more than 11% this week. That’s even as the stock started trading in the S&P 500 on Monday.

It’s hard for me to get too excited about something like this with so many details being left out. That said, I am excited about the way Apple shares are trading now.

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Trading Apple

Daily chart of Apple stock.

Daily chart of Apple stock.

On the first day of trading in December, Apple stock broke out over the November high and downtrend resistance (blue line).

However, shares chopped below the October high at $125.39 and 61.8% retracement until last week. Unfortunately, this breakout lacked follow-through as bulls struggled to keep Apple elevated.

In early Monday trading - while the market was under intense selling pressure - shares were breaking back below the October high and the 10-day moving average. It looked like the bullish move was over, until the stock’s reversal got it out of that huge rut.

The reversal followed by Tuesday’s rally is hard to be bearish on. From here, bulls are certainly looking for a retest of the September high near $138. That’s only a few bucks above Tuesday’s high.

If we get there, breakout traders will likely do some selling into the $137 to $140 area, but longer-term traders may be looking for an even higher move into earnings, which will likely be in late January.

Specifically, they could be targeting the 123.6% extension near $146. If it gets there, $150 isn’t out of the question if the market is behaving well.

Ideally on the downside, last week's high at $129.58 will act as support from here on out. 

Bulls won’t even want to see the October highs get retested at this point. However, they really won’t want to see this level fail if it is retested.

Below this week’s low at $123.45 could pressure Apple further, potentially putting the $117 to $120 area on the table. The various moving averages and support marks in this area should at least give Apple a bounce, should it get there. 

Here's the bottom line: Look for last week's high to act as support on the downside. On the upside, let's see if Apple can take out Tuesday's high and retest $138.