Apple Inc. (NASDAQ:AAPL) Checking in with the Bulls

Apple Inc. (NASDAQ:AAPL) Checking in with the Bulls

Apple Inc. (NASDAQ:AAPL) Checking in with the Bulls

The bullish news this week for Apple is the ratings upgrade from Raymond James.  Analyst Chris Caso took a forward-looking stance on the stock, basing his upgrade not on this year’s performance but on “the impact of a 5G iPhone product cycle in 2020.”

He sees Apple gaining materially from its recent settlement with Qualcomm. While the settlement included a lump-sum payment from Apple to the chipmaker, it also resolved the patent dispute and allowed Apple access to Qualcomm’s high-quality modem chips.  During the course of the dispute, Apple had fallen back on Intel Corporation’s (INTC) chips, and customers had noticed – and complained about – the difference. It’s a hazard of building a niche on a devoted fan base.

Expanding on this in his note, Caso said: “Our call may well be early – we expect this year’s iPhone cycle to be the weakest in years, and today may not be the right time to buy ahead of that weakness… But since the near-term market moves are being driven by macro conditions as much as fundamentals, we’ve decided to upgrade now and let our clients decide the best time to execute on our idea.”

In line with this general optimism on Apple’s longer-term outlook, Caso upgraded his rating to ‘buy’ and set a $250 price target. His price target, significantly higher than other analysts’, suggests an upside potential of 23% for AAPL shares.

Caso is not alone in taking the bull stance on AAPL. Merrill Lynch’s Wamsi Mohan has long maintained a buy rating on the stock, and recently reiterated it, along with this $230 price target. He based his rating on third part sales data showing “F3Q19 App Store revenue is ~$3.9bn (+18% y/y). This represents a slight acceleration from F2Q growth of 17%.” Mohan’s price target is indicative of a 13% upside.

Five-star blogger D.M. Martins Research also sees long-term positive trends ahead for Apple. Laying out a detailed bull case, the blogger concludes: “I believe AAPL continues to be a solid investment. In fact, I have recently called it ‘my FAAMG stock for the rest of 2019.’ Justifying my optimism is the company’s long-term prospects, which I believe to be promising yet discounted for short-term worries over trade policy and global economic deceleration.

“More specifically, I see in the more stable and predictable services revenue growth and the success of new device form factors, including the Watch and other wearable products…”

The Bottom Line

Apple has shown strong growth in the past year, with the 29% share price gains outpacing both the NASDAQ and S&P 500 indexes, but the company has faced dangerous headwinds, too. To a large extent, Apple management has been able to manage the expectations over the past six months, lower the bar, and then beat the lowered expectations, but that strategy may be running its course.

The result, as seen above, is mixed reviews. Respected analysts are lining up on both the bull and bear sides for this stock, and there are strong cases made in both directions. The analyst consensus, however, remains bullish on Apple. AAPL shares get a moderate buy rating, based on 20 buys, 14 holds, and 2 sells assigned in the past three months. Shares are trading for $202, so the $215 average price target implies a 6.36% upside potential.

Overall, the bias in prices is: Upwards.

Note: this chart shows extraordinary price action to the upside.

By the way, prices are vulnerable to a correction towards 194.37.

The projected upper bound is: 211.75.

The projected lower bound is: 193.42.

The projected closing price is: 202.58.

Candlesticks

A big black candle occurred. This is bearish, as prices closed significantly lower than they opened. If the candle appears when prices are “high,” it may be the first sign of a top. If it occurs when prices are confronting an overhead resistance area (e.g., a moving average, trendline, or price resistance level), the long black candle adds credibility to the resistance. Similarly, if the candle appears as prices break below a support area, the long black candle confirms the failure of the support area.
During the past 10 bars, there have been 5 white candles and 5 black candles. During the past 50 bars, there have been 26 white candles and 24 black candles for a net of 2 white candles.

An engulfing bearish line occurred (where a black candle’s real body completely contains the previous white candle’s real body). The engulfing bearish pattern is bearish during an uptrend (which appears to be the case with APPLE INC). It then signifies that the momentum may be shifting from the bulls to the bears.

If the engulfing bearish pattern occurs during a downtrend, it may be a last engulfing bottom which indicates a bullish reversal. The test to see if this is the case is if the next candle closes above the bottom the current (black) candle’s real body.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 42.8113. This is not an overbought or oversold reading. The last signal was a sell 2 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 55.28. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 32 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 37. This is not a topping or bottoming area. The last signal was a sell 0 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 6 period(s) ago.

Rex Takasugi – TD Profile

APPLE INC closed down -3.070 at 202.590. Volume was 24% below average (neutral) and Bollinger Bands were 56% narrower than normal.

Open High Low Close Volume___
205.790 206.500 202.360 202.590 20,929,308

Technical Outlook
Short Term: Neutral
Intermediate Term: Bullish
Long Term: Bullish

Moving Averages: 10-period     50-period     200-period
Close: 203.09 193.31 187.30
Volatility: 21 31 40
Volume: 18,903,398 26,026,530 33,003,570

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

APPLE INC is currently 8.2% above its 200-period moving average and is in an upward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of AAPL.O at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on AAPL.O and have had this outlook for the last 25 periods. our momentum oscillator has set a new 14-period low while the security price has not. This is a bearish divergence.

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