Six years ago I developed a scan that looks for bullish and bearish opportunities in the market. I have run this scan every trading day since the beginning of 2009. The scan looks at a number of technical indicators and at the end of the day I usually have a handful of bullish stocks and a handful of bearish stocks. Wednesday night, Apple (NASDAQ: AAPL) appeared on the bullish list.

After AAPL appeared on the bullish list, I started looking at the chart and I liked what I saw. The stock has dipped a little in the last month and a half, but it found support in the $105 range. In fact, it found support there twice and gave the upwardly sloped trendline time to catch up. Having two different sources of support is usually a good thing as it gives you a clear-cut stop-loss point if you are going long the stock.

apple-stock-chart

There is some resistance at the recent high of $120, but I can see the stock moving back up there with relative ease. Then it will depend on the market circumstances and the sentiment as to whether the stock breaks through the resistance.

After looking at the daily chart, I also examined the weekly chart and I noticed somewhat of a pattern in the 10-week RSI. The stock went through a similar downdraft at the end of 2013 and the beginning of 2014. The RSI dipped under 50 on two occasions and then the stock exploded higher and gained 65% over the next nine months. The 10-week RSI just dipped below the 50 level for the first time since April. Could this be the sign that AAPL is getting ready to go on another run? I think so.

AAPL-stock-chart

If there is one area of concern I have toward AAPL it is the sentiment toward the stock. Investors are extremely bullish toward the stock as evidenced by a short interest ratio of 1.30, a put/call ratio that is lower than 94% of the readings over the past year and the fact that 41 out of 51 analysts rate the stock as a “buy.”

When it comes to looking at the sentiment indicators, it usually pays to be a contrarian. However, when a stock is as fundamentally sound as Apple and the technical performance has been so strong, it is hard not to be bullish. Contrarian investing comes naturally to me, but you don’t want to be contrarian just to go against the crowd. It has to make sense. Sometimes bullish sentiment is warranted and sometimes it isn’t. In Apple’s case, the bullish sentiment is warranted.

I would look to buy AAPL and use the $105 level as a stop-loss point. If the stock hits $120, as I think it will, you will want to see how it reacts when it gets there. I have the feeling it will blow right through there, but if it stalls for a few days and then starts back down, you will want to be cautious.

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Published by Wyatt Investment Research at