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Apple Surges and is Poised to Break Out

David Becker
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Apple Surges and is Poised to Break Out

After reporting stronger than expected earnings and better iPhone sales, Apple (NASDAQ:AAPL) is poised to breakout after climbing nearly 9% last week. The company announced an increase in their buyback plan as well as a 7:1 stock split, which has retail investors interested in purchasing Apple below $100 dollars per share.

Apple is preparing to raise $17 billion in international and domestic bonds in order to help finance its stock-repurchase program, which the company has increased to $90 billion from $60 billion. Apple (AAPL) has a cash pile of $150 billion, but $130 billion is held overseas, and repatriating it would incur a tax rate of 35%. A debt sale would add to the $17 billion that Apple raised a year ago, when demand topped $50 billion.

The stock has some seasonal tendencies, which generally take place after the release of 3Q fiscal earnings, which occur in July. May and June has showed relatively flat returns for the technology giant over the past 20-years, but July and August have been outstanding. In each of the summer months, Apple has climbed more than 70% of the time for an average gain of approximately 6%.

The stock is testing the December highs near 572, a break would likely lead to a test of target resistance seen near 675. Support on the stock is seen near the highs in February and March near $550. Momentum on the stock price is strong as the MACD (moving average convergence divergence) index is printing at its highest level since February. The MACD generated a buy signal last week as the spread (the 12-day moving average minus the 26-day moving average) crossed above the 9-day moving average of the spread. The RSI (relative strength index) moved higher with price action, but is printing near 71, which is above the oversold trigger level of 70.

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