Apple (AAPL) - Get Report his been bumping up against a very solid resistance zone for well over a week now. It is beginning to look like a more drawn-out consolidation will be needed before the current rally can extend further.
For patient Apple investors, this healthy process will provide a low-risk entry opportunity while allowing the stock to rebuild its strength.
From mid-January through late February, Apple was in the process of testing a major support zone. This important zone included the stock's 40-week moving average as well as the 2015 spike low. Apple remained above this level during a very volatile timeframe and was able to put in multiple weekly lows here. Once the dust settled, Apple was on solid footing and ready to mount a rebound. At last week's peak, the stock had rallied more than 13% from its January/February lows.
This impressive rebound drove shares back up to the $105-to-$107 area. This heavy resistance zone includes the stock's December low at the lower band and September/October lows at the upper band. Apple's January peak lies right in the middle. With the rally becoming somewhat stretched, this area is proving difficult to penetrate. Apple may need to continue its weeklong consolidation with a healthy pullback before this key zone is cleared.
For patient bulls, this will allow for lower-risk entry levels. Investors should eye the $103-to-$102 area in the near term. If the stock can continue its basing above this area, the footing for a fresh bull run will be in place.
Apple is one of Jim Cramer'stop two value picks in his Action Alerts PLUS charitable portfolio. He and Research Director Jack Mohr recently wrote:
"For Apple, the stock has dropped nearly $30 in nine months as a result of temporary weakness in iPhone sales (mostly related to the December and March quarters). We consider this a temporary distraction, rather than a reflection of any structural crack in the business model. In fact, we believe the market is discounting the company's expanding ecosystem, with a $30 billion/year services business, new product categories (i.e. Watch), partnerships (HealthKit, HomeKit, CarPlay) and future opportunities (TV and autos), providing Apple with a path towards double-digit annual sales growth and 15-20% annual EPS growth long term."
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Disclosure: This article is commentary by an independent contributor. At the time of publication, the author was long AAPL.