Apple Inc.: A Breakout in AAPL? Not So Fast, My Friend!

Apple stock bulls are perhaps a little too eager right now

Head Trader & Strategist, The Steady Trader  |  Apr 14, 2016, 8:36 am EDt

pple Inc. (NASDAQ:AAPL) rallied with the broader stock market on Wednesday as the financial sector led a next round of risk-on behavior. A look at my social media stream showed that bullish commentary on Apple stock was about as loud as ever, as AAPL overcame a key area of technical resistance.
While I see what the bulls are cheering for, there are also reasons for me to borrow a phrase from legendary college football analyst Lee Corso:
“Not so fast, my friend!”
Before looking at the charts, note that Apple Inc. is scheduled to report its next batch of earnings on April 25, which likely will be the next bigger toggle point for the stock.
On Wednesday, Motor Trend leaked pics of the rumored Apple car, which may have helped propel the stock higher on the day. However, without any details, it’s too early to get either excited or disappointed about the prospects — and thus, little reason to chase Apple stock higher.

Apple Stock Charts

We see that despite a sharp 30% drop off its 2015 highs, AAPL at the January/February double-bottom held its 2009 support line. This support line also coincided with a plethora of horizontal support as marked by the blue shaded area.

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In that vein, the bigger-picture movements remain intact; investors can look to sell Apple stock at the top of the multiyear range and look to buy dips at the lower end. Naturally, this works until it doesn’t, but I would be remiss not to point out what has worked in the past.

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Before looking at the daily chart, allow me to once again state that I am a big believer in Apple as a company and would never dare to bet against the company or the stock from a longer-term perspective.
Looking at the nearer-term picture, however, there are some concerns worth pointing out for those giddy to chase the stock higher on any breakout attempts.
First, let’s note that off the January/February lows, AAPL has now rallied about 20% in a fairly steady (if not too steady) manner. Along the way, near-term technical areas of resistance were broken and the stock continuously squeezed higher. For a little perspective on this, read my note on Apple stock from Feb. 11 where I said the stock would be a buy for a trade on a push above the $97 area.
Getting right to the wood, Wednesday’s rally in AAPL stock pushed it above its red 200-day simple moving average for the first time since last November, which chart-chasing traders were quick to label bullish.
But note that last November, Apple stock managed to remain above this moving average for an entire day-and-a-half before quickly reversing lower. Also, the stock is still near the diagonal resistance line from last summer, and right at the 61.8% Fibonacci retracement line measured from the lower high last November into the January/February lows.
Last but not least, momentum oscillators such as the MACD are in overbought territory, where it historically would be difficult for a sustainable breakout to occur.

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All in all, while traders might enjoy marginal upside in Apple stock from here — partially as a result of this week’s options expiration levitation — the aforementioned points hint at a heightened risk of chasing the stock higher from here.
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