Apple (AAPL) - Get Apple Inc. (AAPL) Report stock has been on an absolute tear for most of this year. In early January, management updated its fiscal first-quarter outlook, warning investors that its results would come in below expectations.
This sent shares reeling, hitting 52-week lows near $142. That day marked the low, though, as Apple stock has gone on a run of more than $60 per share from those levels. Apple is a great company with strong financials, but did it deserve to rally more than 40% off its lows?
In doing so, it added about $240 billion to its market cap as the stock continues to tiptoe higher. Let's look at the charts to see if that run is about to stall out.
Trading Apple Stock
Since Jan. 3, the rally in Apple stock has easily outperformed its FANG counterparts, as Facebook (FB) - Get Facebook, Inc. Class A Report , Amazon (AMZN) - Get Amazon.com, Inc. Report , Netflix (NFLX) - Get Netflix, Inc. (NFLX) Report and Alphabet (GOOGL) - Get Alphabet Inc. Class A Report (GOOG) - Get Alphabet Inc. Class C Report have all underperformed the iPhone maker in that span. That said, they're all up on the year, too.
How long can we expect this to continue, though? It will be interesting to see how much stock Apple management bought back in the quarter, given that the company has such a hefty buyback program. Adding to that, the April quarter is when Apple historically announces its capital return plans regarding its dividend and the buyback.
Therefore, trying to size up Apple stock ahead of earnings is no easy task. In mid-March, Apple stock worked its way into overbought territory as it temporarily breached the $195 area. The stock found its footing in the upper-$180s and surged to its year-to-date highs earlier this week. For now, it's holding above its 61.8% retracement for the 52-week range, with uptrend support and its prior recent YTD highs at $195.
Below $195 and a moderate correction could take place. The first downside target would be roughly $190, where Apple stock would find its 20-day and 200-day moving averages. Below that and the 50% retracement near $186 and a notable level at $185 could buoy the share price.
Finally, if none of these levels hold up and Apple is really pulling back, the prior breakout level we flagged in March.
On the upside, $215 may hold Apple stock in check should it continue higher. But the question remains: Will Apple stock rally into earnings and set up a sell-the-news event, or will it consolidate/pullback in order to digest its recent gains ahead of the report, giving it a chance to rally post-earnings?
Note: Apple is scheduled to report earnings on April 30.
Shares were also downgraded on Monday, as analysts at HSBC went from hold to reduce, but raised their price target to $180 from $160. Currently, that would drag Apple stock down to its 50-day moving average. I currently view $175 as a "worst case" scenario in the short term. However, bulls have a less attractive risk/reward after such a big rally. Apple stock needs to cool off a bit and digest this big move for that risk/reward to become more attractive.
Apple stock climbed 56 basis points on the day, closing at $200.62.
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This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.