Shares of Apple (AAPL) - Get Report are down 0.17% Monday afternoon to $174.59. While the stock is fading off its morning highs, traders and investors alike are optimistic that the stock is starting to breakout.
Indeed, shares of Apple have been coiling in a very tight consolidation for nearly an 30 days. With Monday's brief rally, shares are flirting with a big-time breakout. Let's take a closer look.
Trading Apple Stock
The $175 level was a lid on Apple stock for the whole month of February. However, on Monday Apple jumped above it, as a series of higher lows throughout the past few weeks continued to inch the stock closer to its short-term ceiling. Admittedly, a breakdown below $175 would be concerning and possibly negate the bullish setup in Apple.
But if the stock can stay above this mark, it has a chance to piece together a significant move. Just above current prices is the falling 100-day moving average. While this mark could act as resistance -- currently near $178.50 -- a rally through this mark could spark a further rally to the $180 to $185 area.
At this point, that's what I'm watching now. Monday's brief rally over $175 was step No. 1, while getting through the 100-day moving average is step No. 2. If it can do those two things, it opens up a potential rally to $180 and $185, then possibly the 200-day moving average.
There are a lot of investors in this name -- that's a given -- although the stock's mighty fall from the highs has certainly shaken some of them. After pre-announcing a worse-than-expected earnings warning in late January, though, the stock has been making its way higher ever since. A gap-up later in the month on earnings is what's ignited this sideways consolidation over the past four weeks.
Oddly enough, Warren Buffett's Berkshire Hathaway (BRK.A) - Get Report (BRK.B) - Get Report did not step in and buy Apple stock despite it falling from more than $230 to less than $140 in just a few months. In fact, the firm actually reduced its stake by about 1%. That said, even after a ~40% peak-to-trough decline in the stock price, it's still Berkshire's largest holding. So it makes some sense why the Oracle didn't want to add to his position.
Look to see if Apple can maintain this breakout level and if so, watch to see if it gains some momentum.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.