Technical Opinion
Apple (NASDAQ:AAPL) is a stock which is in recent years has been the barometer of the entire Nasdaq stock index and the entire high tech industry in the US. The stock has a Beta correlation factor of 0.94, and it has been indeed a leader for the entire US markets, almost on a daily basis. The stock has been in a downward corrective move in recent weeks and is currently testing its 50 week moving average, it is not clear at this stage as to how low this correction can reach, as all technical indicators are more or less bearish at the moment, but these are only short to medium term indicators.
So for short term traders and investors thing are risky with Apple at the moment, as the stock could move sharply lower, or it could move in all kinds of deceptive ways through rallies that may eventually fade and reverse into declines again. Even if the stock stays above key moving averages, this will only be seen as a light buy signal by traders and not as an important sign of bottoming action. Moreover the stock may be in the process of expanding its parallel channel as seen on the weekly chart below, while maintaining some upward momentum. At the time of writing this article, the US markets are strongly dependent on the direction of the German DAX index, and the Russel 2000 index in the US, no solid rally will take place unless these two indices start to move steadily higher. Apple is a leading stock, but even leading stocks take breaks, and during these break times these leading stocks are simply cut off from the market, as they are readjusting for the next leading period.
The above weekly chart shows how Apple stock has traded in recent years, and where it stands today. The ADX index shows a bearish reversal which at the very least will delay any rallies for Apple.
Fundamental Opinion
Apple is a very strong stock fundamentally speaking, with valuations that dwarf those of many other stocks. Apple has a fundamental value which based on the next two years and beyond, ranges between $250 to $350. Long term investors who can afford to buy sufficient numbers of shares of this stock and can also afford to buy even more during short term declines such as the one we are seeing at this time, could end up making very big profits in the coming years. A fundamental value in the range $250 to $350 can indeed make this possible as Apple grows to its limits and evolves into a world leader in some key technologies. The next big market for Apple includes products and gadgets that will go into homes and cars, therefore even this industry specific analysis which has nothing to do with the $250 to $350 price economics, still confirms such a big growth potential in the coming years. The launch of smart products that will specifically solve the problems of home and car owners will enable Apple to tap these massive markets. So Apple is definitely a strong buy for all serious long term investors who are willing to wait and even buy more of the stock as and when they see best.
In reality, some analysts believe that Apple will trade higher and will exceed even the most optimistic price targets, which means that it can go even beyond $350. The question is over how many years that will happen, as the cost of inflation is always a major issue in long term investing. At this time however, it is certain that all dips in the stock price of Apple are essentially buying opportunities and all serious investors are looking at them, even with modest price targets in their minds.
In the case of Apple, fundamentals definitely prevail over technicals, therefore any apparent weakness on the technical charts will be seen as misleading and short-lived by investors and industry analysts. The bottom line is that Apple stock will trade in a resilient way, recovering from each and every drop, while producing significant margin of movement in both directions as the stock moves up and down, but the underlying direction will be up. The rest of the stock market is also due for making some long term all time highs, so it will not be a surprise to see Apple lead the way forward once again.
