$200-dollar Apple in sight
Apple was diverging in more ways than one on Friday. After a week topped and tailed with bullish news, the $869bn titan was pulling further away from the broader market. Since the spectacular global sell-off on 8th February, Apple shares were about 18% higher, compared to the S&P 500’s 3% recovery and the stock had posted about double the gain seen in the S&P 500 Information Technology Index. For the year to date, Apple had progressed by 8% whilst the S&P benchmark was still struggling a tad below the flat line. The stock’s 13% advance to a new record high in a week when world shares were set to post one of their biggest falls since late March, underlined that a well-grounded shift in sentiment might be brewing for Apple.
Fundamentally, the most obvious triggers were the group’s resilient first-quarter iPhone sales with solid revenues and profits, plus the announcement that Apple would double its share buyback to $100bn a year. These were followed on Friday by news that Warren Buffett had invested in the stock again, after a first bet in 2016. The tycoon’s Berkshire Hathaway vehicle said it bought 75 million more shares at a price of $42.5bn in the first three months of the year, taking its stake to 4.7% from 3.3% at the end of last year.
The news brought the tantalising prospect that Apple could reach $200 a share closer. Whilst the significance of the milestone would be largely symbolic, the market psychological impact of round numbers is well known, seeming to produce increased momentum both on approach to such prices and beyond.
- On a chart technical basis, these prospects are theoretically supported by linear and non-linear structures like the 50-week moving average (MA) in the chart below.
- The slight penetration price below the average coincided with anxiety about the Cupertino company’s pivotal week, from which the stock subsequently recovered.
- An all-important 61.8% Fibonacci retracement is notched close to the prior week’s close and the current week’s low if intervals are drawn from the base in February to the prior record high on 16th March.
- On the other hand, on a monthly view, Friday’s penetration slightly above the prior peak in March poses risks.
- The pattern lends itself to interpretation as a double top, a negative structure.
- Together with long-run divergence against the Relative Strength Index oscillator and a despoiled initial rising trend line from 24th June 2016 before collapse in February (see the fainter line in the image below) it may be that price could fail for a second time at current levels.
- Probabilities though, do seem to favour the upside more, though a closer analysis using shorter-term intervals would be required to confirm this.
- In the weekly view at least, trending indicators are pointing higher – including the RSI that has plenty of room to run before becoming overbought.
- Both the rising trend line that survived the collapse between 19th January and 9th February and the 50-week MA also provide visible support to price, suggesting AAPL can progress higher
Technical price chart: Apple Inc. – weekly intervals
Source: Thomson Reuters and City Index
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