Apple Shifts to Mojo Status From Value Stock

NEW YORK (TheStreet) -- Among the mojo stocks on which I focus, the leadership has shifted back to Apple (AAPL), after billionaire Carl Icahn recently disclosed a $1.5 billion stake in the company. It appears that Icahn wants Apple to borrow cash to accelerate a share repurchase program. The stock popped above its 200-day simple moving average at $470.44 on Tuesday and then tested $504.25 on Wednesday vs. my annual risky level at $510.64.

Back on September 21, last year, we learned that Apple trees do not grow to the sky following an all-time high at $705.07. This year, Apple shares continued to slide all the way to below $400 in April and again in June.

Back on March 14, I wrote, Apple Wins the Search for Value, with the stock trading at $428.35. The stock had a buy rating, according to ValuEngine, and was 23.9% undervalued. The weekly chart profile was extremely oversold. This defines a value stock, by my methodology.

At the time of this writing, Apple had tested and held my annual pivot at $421.05, with a semiannual risky level at $470.21 and my annual risky level at $510.64.

Today Apple is no longer a value stock, and has shifted back to being a momentum or mojo stock.

The stock has a hold rating, is 10.9% overvalued and Wednesday's high tested the ValuEngine one-year price target at $501.33. Apple can still trade up to my annual pivot at $510.64, but there is also risk back to the lower annual pivot at $421.05.

If the stock can end the week above $510.64, the upside is to my semiannual risky level at $620.84, which will make Icahn and his fellows happy campers.

The weekly chart profile for Apple shows that its 12x3x3 weekly slow stochastic reading is rising at 67.01, which is below the overbought threshold reading at 80.00. Note how the stock held its 200-week SMA at $386.51 the week of June 29. The weekly chart for Apple stays positive on a close this week above the five-week modified moving average at $451.85. The weekly chart below was printed with Apple near Wednesday's high.

Chart Courtesy of Thomson/Reuters

Keep an eye on the five major averages as additional weakness into Friday's closes could provide technical warnings for the stock market. The major equity Averages ended Wednesday straddling their five-week modified moving averages at 15,362 Dow Industrials, 1669.6 S&P 500, 3566 Nasdaq, 6440 Dow Transports and 1026.63 Russell 2000. Both the Dow Industrials and Dow Transports closed Wednesday below their averages, which would shift their weekly chart profiles to neutral, if not negative.

Weekly momentum readings are overbought for Dow Industrials, S&P 500, Nasdaq and Russell 2000. The reading for Dow Transports is flattening at 74.22 below the overbought reading of 80.00.

With the stock market still under a ValuEngine valuation warning, all we would need is weekly closes below all of the five-week modified moving averages, with momentum declining below 80.00, to have a confirmation that the early August highs are cycle highs. This seems highly unlikely this week for the Nasdaq and Russell 2000.

I do not own Apple shares.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written 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.

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