A key resistance level has formed in the chart of Apple Inc. (AAPL). If this level is broken, a breakout could ensue.
AAPL designs a wide variety of consumer electronic devices, including smartphones, tablets, PCs, smartwatches, TV boxes, and more. The majority of its revenue is through iPhone sales.
The company is benefiting from strong momentum in its Services segment, due to increased demand for the App Store, Apple Music, video, and cloud services. AAPL is also seeing healthy demand for its Apple devices including iPad, Mac, and Wearables. Its prospects for the first quarter are strong due to iPhone 5G sales.
AAPL had $90.9 billion in cash at the end of the last quarter, down from $93 billion in the previous quarter. This is compared to $98.7 billion in long-term debt. The company does have a healthy current ratio of 1.4, indicating plenty of liquidity to handle short-term debt. It also is very profitable with a net margin of 20.9%.
The company has had stable earnings and sales growth with a 3-year average revenue growth rate of 4.7% and 10.2% for EPS growth. While the company can be considered overvalued with a 40.5 P/E, that is on par with the S&P 500.
Its stock has shown strong mid and long-term momentum leading to a “Strong Buy” rating in our POWR Ratings system. This is shown in its chart below.
Take a look at the 1-year chart of AAPL below with added notations:
Chart of AAPL provided by TradingView
For the past 9 months, AAPL has been on a solid upward trajectory, albeit with a nasty correction along the way. Twice now it has hit the $138 level (red) as resistance, which is also the new 52-week high barrier. A break of that $138 mark likely means another long leg higher for AAPL.
The possible long position on the stock would be on a breakout above the $138 level with a protective stop placed under it.
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Christian Tharp, CMT
AAPL shares were trading at $132.30 per share on Monday morning, down $0.39 (-0.29%). Year-to-date, AAPL has declined -0.29%, versus a 0.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Christian Tharp, CMT
Christian is an expert stock market coach at the Adam Mesh Trading Group who has mentored more than 4,000 traders and investors. He is a professional technical analyst that is a certified Chartered Market Technician (CMT), which is a designation awarded by the CMT Association. Christian is also the author of the daily online newsletter Todays Big Stock. More...
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