Supply chain concerns continue to linger, as the number of infections and deaths continue to climb due to the new virus. The latest concerns involving Apple include production disruption at Foxconn facilities, along with reports of a 12% decline in global smartphone production.
Despite various production plants shutting down, quarantines and travel restrictions throughout China, the U.S. stock market continues to remain relatively stable. That includes Apple too, as the stock continues to rally on each pullback.
That held true on Monday too, with shares now flat on the day. Of course, it helps that other mega-cap tech stocks like Alphabet (GOOGL) - Get Alphabet Inc. Class A Report and Amazon (AMZN) - Get Amazon.com, Inc. Report were rallying too.
The action makes Apple a perfect pick for Real Money’s Stock of the Day. Let’s take a closer look at the charts.
Trading Apple Stock
The momentum in Apple stock has been incredible, if not only for the fact that we’re talking about a $1.4 trillion company. You’ll notice on the six-month chart above that investors readily gobbled up even the shallowest of dips over the past few quarters.
Each correction down to the 20-day moving average - which happened three times in a three-month span from October to December - resulted in a powerful rally. From the December low to the January high, a span of 38 days, Apple shares rallied nearly 28%.
However, it’s clear that momentum is beginning to wane. I say that not from a position of bias, but simply after observing the charts.
Where it once took three months to get three tests of the 20-day moving average, it has now taken just 10 trading sessions. In fact, Apple stock has tested this key short-term moving average four times in that span, closing below it twice. Further, Apple's early February rallied failed to take out its January high, despite the Nasdaq, S&P 500 and Dow Jones all hitting new all-time highs, (remember, Apple is included in all three indices).
Monday’s rally is indeed impressive, but one has to wonder if Apple stock will be able to muster the strength to push through $323.50 resistance, take out the $327.85 high and push meaningfully higher.
After big rallies, stocks correct in one of two ways: time or price. If it’s the former, we may see Apple stock chop sideways before resuming higher. If it’s the latter, we’ll need a deeper pullback.
From here, it would be refreshing to see a dip down to the 50-day moving average and $300 breakout level. Below that and a dip down to the $275 to $280 area may be in the cards.
Above $323.50 and the 52-week high is on the table. Above that and more upside can resume.