Apple Hits New Highs but This Rally Is Getting Out of Hand

Apple continues to plow to new highs. Is the rally getting out of hand? Let's look at the stock.
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Apple (AAPL) - Get Report continued to punish the shorts, making mincemeat of their positions as the tech giant and world's largest company by market cap continues to bulldoze its way higher.

Shares were higher by another 2% in Thursday’s trading, and hit a new all-time high of $310.43. It’s worth mentioning that the second- and third-largest U.S. stocks also hit new all-time highs on the day, with Microsoft (MSFT) - Get Report and Alphabet (GOOGL) - Get Report pushing higher.

Apple now commands a market cap of $1.355 trillion, while Microsoft and Alphabet sit at $1.24 trillion and $975 billion, respectively. The iPhone maker has gained 105% year over year. The move has been breathtaking and buy-and-hold investors have been rewarded for their patience.

But no move can last forever. The company’s coming 5G iPhone will likely be great, China iPhone sales are better than expected and its shift to services revenue should increase its valuation. With all that said though, it’s just too hard to pull the trigger and buy Apple here.

Let’s look at the charts.

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Trading Apple Stock

Daily chart of Apple stock.

Daily chart of Apple stock.

For tactical traders and short-term investors, a buy-the-dip strategy is most certainly in play with Apple stock. Even by those standards though, Apple shares feel overheated.

The stock’s 20-day moving average has been the buy-the-dip spot for four months now, and even that is all the way down at $289.40, although it’s quickly rising. Uptrend support (blue line) is down near that mark as well.

Further, the $293.80 mark has acted as short-term support, as noted on the chart above. Should both short-term support and trend support give way, it puts the 50-day moving average in play. There’s also the potential for the 78.6% retracement near $275 to be in play, but I would expect the 50-day to soon pass this mark and act as support first.

The stock has been quite overbought from a technical perspective, and that’s outlined via blue boxes on the charts. Remember, an elevated reading of the relative strength index (RSI) is not a reason on its own to sell, but should be used in combination with other readings.

I don’t know when Apple will pull back or how far it will pull back. I only know that Apple has rallied too far, too fast, and that investors will almost certainly be able to buy the stock at a cheaper price than $307 in the future. Whether that’s in six days or six months is hard to say.

So what should buy-and-hold investors do? Those comfortable parting ways with some of their holdings may consider selling a partial stake and buying it back at a lower price. This is not something that’s advocated often with a high-quality name like Apple, but again, this rally is not of the ordinary type.