Is Apple Stock a Buy-the-Dip Pick Ahead of Tech Giant's Earnings Report?

Apple stock is slipping on Monday but reports earnings on Tuesday after the bell. What should investors do? The charts give clues.
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Put simply, the rally in Apple  (AAPL) - Get Report stock has been obnoxious. Even with Monday’s 2.5% decline, the stock is still up more than 96% over the past year.

For a company that now sports a market cap north of $1.3 trillion, that type of rally is simply stunning. 

The question now is: Do investors buy the dip in Apple and, if so, when?

Some may view the pullback as bullish - the pause that refreshes, as Coca-Cola  (KO) - Get Report ads once put it. Apple was clearly overheated and, at the very least, needs time to digest its massive gain over the past six months. 

After all, Apple stock is still up about $120 a share, or 63%, from the August lows.

That said, earnings will likely complicate matters. The company is scheduled to report its fiscal-first-quarter results on Jan. 28 after the market closes.

How investors react to that report - and that may sit largely with what market sentiment is like vs. how investors feel about Apple’s quarter - will play a big role in the days and weeks to come for Apple’s share price.

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Trading Apple Stock

Daily chart of Apple stock. 

Daily chart of Apple stock. 

Here’s the deal: A blowout earnings result and better-than-expected guidance could easily propel Apple stock higher from here. 

The stock is pulling back to its 20-day moving average, and doing so ahead of earnings should be a relief to the bulls.

This stock hit an all-time high on Friday. For it to continue higher into the report would only move the bar higher than it already is.

From here, traders will have to see if the report is strong enough to propel Apple up and over $320. A close above this level would trigger even more upside potential.

I love Apple and very much believe in the buy-and-hold method for this name. But it is subject to massive moves and sentiment shifts, despite its enormous size and seemingly impenetrable business.

Sentiment for Apple remains strong at the moment, but if that changes, we may finally start to see the stock unwind a bit. A larger correction down to the $290 area would be the first notable decline in some time.

A fall to $290 would mark a decline of 10% from the current high, while also landing the stock near uptrend support (blue line) and the 78.6% retracement from the June low to the recent high. Further, the 50-day moving average sits at $285.

Should that fail as support, look at the $260 to $270 area to buoy Apple. There it will likely find the 100-day moving average, as well as the 61.8% retracement and a two-month consolidation zone from November and December.