Polishing Apple's Profile for 2013

NEW YORK ( TheStreet) -- Apple ( AAPL) has been an excellent stock for my buy-and-trade strategy. Looking back to Sept. 12 when I wrote Amazon, Apple and Google Now Overvalued Apple was trading at $660.59 on the way to an all time high at $705.07 set on Sept. 21. At that time Apple stock had a fair value at $609.12 making the stock 8.5% overvalued. The one-year price target was $700.63. Apple thus rallied to its one year price target, then declined to its fair value.

Apple failed to hold its 200-day simple moving average then at $590.33 on Nov. 2, which accelerated its downside momentum. At the market's Nov. 16 lows, Apple's low was $505.75.

On Nov. 21, I wrote Santa Claus Rally Eyed for Online Leaders Apple, Amazon and Google with Apple at $560.91, and my suggested buy-and-trade" strategy was to book profits on strength to the stock's five-week modified moving average, then at $586.46. This test occurred on Nov. 26.

On Nov. 27 I wrote, Apple Wakes Up to a Downgrade to hold from buy. Apple continued to have some upside to just above $594 on Nov. 29 and Dec. 3, but then turned lower in a move to as low as $501.23 on Dec. 17.

On Dec. 7 I wrote How to Trade Apple's Bungee Jump noting that the day before with the stock as low as $518.63 Apple was upgraded back to a buy rating. Even with the additional weakness to Dec. 17, the stock did rebound to $555.20 intra-day on Dec. 7.

The fundamentals for the stock market deteriorated further as 2013 began on Wednesday when the market outran its valuations and as the yield of the U.S. Treasury 30-year bond rose to 3.042% from 2.951% on Monday.

At www.ValuEngine.com we show that 45.3% of all stocks are undervalued with 54.7% overvalued. We show that 15 of 16 sectors are overvalued with the oils-energy sector the cheapest at just 0.15% undervalued. Sectors overvalued by double-digit percentages rose to nine; construction by 24.5%, consumer staples by 19.3%, industrial products by 17.7%, finance by 15.2%, retail-wholesale by 15.0%, transportation by 14.7%, business services by 13.7%, computer & technology by 12.9% and aerospace by 12.8%.

Compared to the market and the computer and technology sector Apple is fundamentally cheap. Apple has a buy rating according to ValuEngine with fair value at $606.94 making the stock 9.5% undervalued. Apple has a favorable price-to-earnings ratio at 12.5. The one-year price target is $581.80. Fundamentally, Apple begins 2013 as a buy-and-trade candidate.

My proprietary analytics show that Apple has an annual value level at $510.64 suggesting that even if the stock falls below $500 in 2013 it will come back to $510.64 as a pivot, or magnet.

Semiannual and annual value levels are $470.21 and $421.05 with a monthly risky level at $604.86, a semiannual risky level at $651.60 and a quarterly risky level at $652.00. Odds are that Apple will stay below $700 for at least the first half of the year.

The monthly chart for Apple ended 2012 with a negative profile closing below its five-month modified moving average, now at $569.78.

Note that momentum (12x3x3 monthly slow stochastic) reading is declining below 80.00 after being overbought since the end of 2009. This keeps Apple a sell strength stock as 2013 begins, as a new all-time high is unlikely.

Chart Courtesy of Thomson/Reuters

The weekly chart for Apple is negative but oversold with oversold momentum (12x3x3 weekly slow stochastic) reading below 20.00. A close this week above the five-week modified moving average at $546.35 shifts the weekly chart profile to neutral. If momentum is rising above 20.00 the chart would be positive.

Chart Courtesy of Thomson/Reuters

Chart Courtesy of Thomson/Reuters

The daily chart profile for Apple is positive with a momentum (12x3x3 daily slow stochastic) reading rising above 20.00. The stock is above its 21-day simple moving average at $532.86 but below its 50-day and 200-day simple moving averages at $559.14 and $599.86.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.