Apple (AAPL) began this month with a powerful earnings-inspired breakout. The stock gained over 6% that day with the help of a big surge in volume. Apple has climbed steadily higher since before beginning to show sighs of exhaustion has last week came to an end. For patient investors, this may signal the beginning of a healthy pullback.
At last week's high Apple had stretched its post-election rally to over 27%. During this powerful rally phase the stock moved well past the 2016 peak leaving behind multiple support levels in the process. With shares now well into overbought territory, while bumping up against major resistance near the 2015 highs, further upside may be very difficult without a pullback. For patient bulls, this process will create a much lower risk entry opportunity than currently available.
In the near term, it's very likely Apple will have trouble clearing the $135 area. The stock's multimonth 2015 highs, three of which developed into important spike highs, rest in this zone. A pullback from this zone would be a low-risk buying opportunity for patient investors. Apple has support in place near the February low at $127, but a deeper pullback is quite possible. If the $127 area is convincingly taken out a drop back down to the $122.50-$121.50 area is likely. This major support zone includes the January high as well as the huge February 1st breakout gap. A fade back down to this area would offer very low risk entry.
Click here to see enlarged chart in a new window.