A Technical Look At Why Apple Shares May Rise Through The Holidays

Apple Inc. AAPL shares have been leading the broader market and the technology sector higher since the market bottomed in mid-October. In terms of percentage moves, there have been bigger winners. However, in terms of stocks that help dictate the movement of the indices, Apple is the biggest lead dog around.

Can the stock continue this run? Does the company really have the fundamental goods to justify the stock's continued success?

What The Bulls See

• A company that continues to sell the "gotta have it" telecommunications/media/entertainment device in the marketplace.
• Reasonable valuation metrics: an enterprise value of $705.88 billion versus a market capitalization of $686 billion and a price-to-sales ratio of 3.81.
• 21.61 percent net profit margins that spin off $36.38 billion in positive levered free cash flows annually.
• A debt-to-equity ratio of 31.64 percent and a current ratio of 1.08, indicating solid balance sheet health.
• An annual dividend of 1.6 percent with a payout ratio of only 28 percent, indicating plenty of room to grow dividends going forward.

Related Link: How Apple Could Sell 60-70 Million iPhones This Christmas

What The Bears See

• A stock nearing the upper edge of the long-term uptrend channel.
• An expensive price-to-book ratio of 6.24.
• A PE of 15 that does not seem too cheap when considering the 2015 estimated growth in revenues and EPS of 5.9 percent and 10.2 percent, respectively.

The Technical Take

Technicians note that Apple shares may be in the final stages of the current rally. The upper edge of the long-term uptrend channel comes into play as potential resistance at around $122-$123. Assuming a short-term peak is made somewhere in that range, the technicians are using Fibonacci retracement lines to project where a pullback may take Apple shares.

Per the attached chart, the potential support begins at $106.46 and continues down to around $80.73. Other technical factors create similar support levels at $97, $89 and $80.73.