Trading Apple Shares After Monday's Rapid Rise

Oppenheimer analysts assign a $320 price target on Apple and say it's time to buy the dip. Here's how to trade the stock now.
Publish date:

Apple  (AAPL) - Get Report is shouldering a mighty load as its surge on Monday helped elevate the entire market.

It’s true that one stock doesn’t make a market. However, despite the recent slide, Apple still commands a $1.2 trillion market cap. It’s a big weighting in the S&P 500, Dow Jones Industrial Average and Nasdaq, and plays a key psychological role for both traders and investors.

Seeing shares open higher by about 3% gave investors confidence on the day. When Apple didn’t correct in morning trading as the S&P 500 fell flat, that was traders’ first clue this one may run higher.

And run higher it has, with Apple shares higher by a whopping 7% at one point in midday trading. The move came after Oppenheimer said investors should buy the dip, upgraded the stock to an outperform rating and assigned a $320 price target.

From Friday’s low, Apple stock has already tacked on 14.5%. Can it clear $300 and rally another 10% from current levels to $320? Let’s look.

Apple is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells AAPL? Learn more now.

Trading Apple Stock

Daily chart of Apple stock.

Daily chart of Apple stock.

The rapid rebound in Apple stock makes it a tough one to trade. On the one hand, it’s still down notably from its recent highs and is below the key $300 area. On the other hand, shares climbed more than 6% from Friday’s low to its close and are up impressively again on Monday, topping 7% at one point.

Missing that sub-$265 dip make it painful to chase Apple now. On the plus side though, much like with General Electric  (GE) - Get Report, investors now have a trading range they can use.

When stocks are in endless decline, it’s too dangerous to guess at the low. Instead, we need to wait for a dramatic move - like we saw on Friday for Apple - so we have a downside level to measure against. In this case, we have some upside levels to measure against, too.

Since we are moving higher, let’s look at the upside first. After clearing the 100-day moving average and prior uptrend support (blue line), Apple stock is now sitting north of $290. I want to see if shares can rally back to the $300 level and the 50-day moving average.

If it does, it will be important to see whether these levels act as resistance or if Apple stock can reclaim them. If reclaimed, look for a move up toward $315.

On the downside, keep an eye on the 100-day moving average. Below it means Apple has also lost uptrend support, and a retest of the lows will be a possibility. In that event, investors also have to be open to the risk of Apple testing down to the 200-day moving average, should the lows not hold.

The bottom line: Watch $300 and the 50-day moving average on the upside and the 100-day moving average on the downside.