Dow component Apple Inc. (AAPL) is trading at a six-week high ahead of Tuesday's "Apple Event," in which the tech icon will reveal the lineup of 5G-enabled iPhone 12s. A recent survey found that 53% of respondents planned to buy this year's iPhone, setting off what some analysts are calling a "supercycle" of phone upgrades. However, many could defer purchases if the release generates sticker shock like it did with the $1,000 iPhone X in 2017.

Key Takeaways

  • Apple stock is gaining ground ahead of Tuesday's iPhone 12 event.
  • 53% of survey respondents said they intend to buy the new iPhone.
  • The stock topped out in August and settled at 50-day exponential moving average (EMA) support in September.
  • Buying and selling pressure is balanced heading into the event.

Wedbush analyst Daniel Ives added to growing enthusiasm this week, calling the release "the most important product cycle since the iPhone 6 in 2014." He also proclaimed Apple the firm's top 5G play for the next year and is looking for starting prices to range from $699 for the smallest display to a staggering $1,099 for the iPhone Pro Max. The analyst notes that Asian suppliers are expecting "stepped-up demand" for the larger model, raising profit expectations.

Despite the table-pounding by Ives, Wall Street as a whole has grown more cautious on Apple stock due to high valuation and a rocketing share price, with a "Moderate Buy" consensus based upon 24 "Buy," 8 "Hold," and a surprising 3 "Sell" recommendations. Price targets currently range from a low of just $67 to a Street-high $150, while the stock is set to open Tuesday's session about $7 above the median $123 target. The placement raises the odds for a sell-the-news reaction after three days of higher prices.

Valuation is the analytical process of determining the current (or projected) worth of an asset or a company. There are many techniques used for doing a valuation. An analyst placing a value on a company looks at the business's management, the composition of its capital structure, the prospect of future earnings, and the market value of its assets, among other metrics.

Apple Daily Chart (2018 – 2020)

Chart showing the share price performance of Apple Inc. (AAPL)
TradingView.com

A multi-year uptrend topped out in the upper $50s in October 2018, giving way to a deep slide that found support at an 18-month low in January 2019. Positive price action completed a 100% retracement into the prior peak in October, yielding an immediate breakout that stalled in the lower $80s in January 2020. The stock fell more than 28 points into March, slicing through the 200-day EMA before bouncing strongly into the second quarter.

The uptick reached the January high at the end of May, setting off a fresh breakout that gathered momentum after the company announced a four-for-one split, effective on Aug. 31. The rally hit an all-time high at $137.98 just two days after the split and rolled into a correction that tested the 50-day EMA through September and into early October. The stock surged off support on Monday, with speculators taking exposure ahead of the event.

Apple Short-Term Outlook

The on-balance volume (OBV) accumulation-distribution indicator topped out in 2015 and eased into a distribution phase that ended in 2016. OBV finally reached five-year resistance in August and rolled into a sideways pattern that has been crisscrossing the contested level. A breakout would finally lift this measurement to an all-time high, while a sell-the-news reaction could reinforce resistance and drop the stock into another down leg.

Long-term relative strength indicators are flashing mixed messages ahead of the event, with a weekly-scale buy cycle offset by a monthly crossover that could confirm a sell signal with a few down days. Like OBV, this combination marks an inflection point, in which buying and selling power is balanced, forcing many market watchers to sit on their hands until one side or the other takes firmer control of the ticker tape.

Relative strength is a technique used in momentum investing and identifying value stocks. It consists of investing in securities that have performed well relative to their market or benchmark.

The Bottom Line

Apple's iPhone 12 event will mark an important test of the stock's strength after shares of the tech giant topped out and rolled into a correction at the end of August.

Disclosure: The author held no positions in the aforementioned securities at the time of publication.