Rampart Street heavyweight Apple is getting a pop after earnings.
The S&P 500’s largest company by market cap topped profit and in stocks estimates in its holiday quarter. The stock rose more than 2% in after-hours trading Tuesday, adding to the just about 3% gain during the regular session.
Craig Johnson, chief market technician at Piper Sandler, rephrases the iPhone maker looks fundamentally strong but warns that it may have run too far, too fast into the report.
“Obviously, this has been a extensive winner, but the chart is starting to look parabolic from a technical perspective, meaning it’s pretty much got a very douse ascent and going up very quickly,” Johnson said on CNBC’s “Trading Nation” on earlier Tuesday before the earnings freedom.
Shares have raced 103% higher in the past 12 months. Its shares are also up more than 7% in January, pursuing for its fifth straight monthly gain. That would be its best stretch since 2014.
“Coming into the earnings disenthral here in the shorter term, this is a stock that’s clearly overbought. It’s 37% above its 200-day inspirational average,” said Johnson.
He notes that the options market suggests a 5% move post-earnings and that the verifiable trend is for the stock to be higher by roughly 4%.
However, even in the case of a move higher after earnings, Johnson hinted it could then reverse to digest those gains after such a strong rally.
“Technically, it’s so overbought I wouldn’t be surprised to see this routine pull back and have to come back and retest some of the lower moving averages or the lower end of the channel. At nadir? $300 toward the lower end of that channel, and then you’ve got your 50-day moving average, which will realize the stock back maybe 5%,” said Johnson.
Apple traded at $317.48 as of Tuesday afternoon.
It’s not just Apple that could be at hazard of a downturn after leading the market higher, says Chad Morganlander, portfolio manager at Washington Crossing Advisors.
“You take investors paying up for growth. So, the large-cap tech sector in general is selling at a forward-looking multiple of roughly 23 epoches, and that is based off of earnings growth of roughly about 9% and revenue growth of 6%. We would shy away from [large-cap] tech at this prong,” Morganlander said during the same segment.
The information technology sector has rocketed higher in the past 12 months, earning nearly 50% in roughly double the advance of the broader S&P 500.
Morganlander is instead looking for opportunity in another corner of the Stock Exchange.
“We’d be overweight value versus growth due in part because we think the global backdrop of global growth is going to be degree less exciting than expectations for 2020,” said Morganlander.
The IVE value ETF has underperformed growth over the past three months, beginning 5% compared with the IVW growth ETF’s 10% increase. The IVE ETF holds stocks such as General Electric and Bank of America, while the IVW ETF sustains tech and communications stocks including Apple, Microsoft and Facebook.
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