The stock’s price action is interesting on Tuesday, the first trading day in the holiday-shortened week. Shares are about flat on the day, a notable laggard as the S&P 500 is up about 2%.
However, Apple is less than 2% off its all-time high from February, while the index is still 11% below its high. Apple serves an important role in the market. Not only is it one of the largest public company in the U.S. by market cap - going back and forth with Microsoft (MSFT) - Get Report - but it also serves an important role from a psychological perspective.
From that perspective, one can see why Apple hitting new highs may have wide-reaching implications. Let’s look at the charts to see if that outcome is a possible reality.
A look at the daily chart above illustrates just how strong this stock has been.
Apple stock is well above its 20-day moving average, as buyers continue to step in on any little dip. That was evident earlier this month. Shares rallied up to $320 before retreating, bouncing hard off the $300 level and 78.6% retracement.
In essence, support came into play right where it needed to. On ensuing dips — even if the stock loses uptrend support (blue line) and the 20-day moving average — bulls must see the $300 to $305 level continue to hold.
While shares are retreating from Tuesday’s high, it would be encouraging to see Apple hold $320 as support. This level has been resistance over the past few weeks and claiming it as support would be a positive development.
The $325 area is obvious resistance, but a breakout over this mark could trigger a significant move higher. Let’s keep this one on our radar this week with this breakout potential in play.
Should shares break below trend and lose the $300 level, it opens up more downside. Specifically, it puts the 50-day moving average and 61.8% retracement in play, near $278 and $283, respectively.
Below that and the 200-day moving average is possible. However, until we see signs that Apple is breaking down, I’d rather buy on dips.