Is Apple Stock A Safe Harbor For Investors During Market Turmoil?

Apple Inc. AAPL shares have been able to shake off a hostile market condition and a bug-filled product launch to maintain its short-term market leadership position.

This is somewhat surprising given just how volatile conditions have gotten for the broader market. In such conditions, money typically flows to the Wal-Marts, McDonald's, Mercks and the utilities -- not one of the leading technology innovators of this generation. The facts are the facts, however, and the fact is that Apple's stock is being used by institutions as a hiding spot during this market choppiness.

The Fundamental Story

Assuming no hiccups occur with the company's revenue or profit projections, the stock appears to be relatively cheap for a technology stock. The price-to-earnings ratio of 15 appears reasonable, considering the revenue and earnings growth projections for 2015 of 12.20 percent and 15.2 percent, respectively.

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Its price-to-sales ratio is only 3.4 (where 5 is typically viewed as fairly valued). Its other valuation metrics are not as attractive, but the balance sheet and cash flow picture is as attractive as any company in any industry.

The Technical Outlook

Technicians appropriately make note of the great relative strength that Apple is displaying. They note that Apple looks like it is in the middle of a consolidation phase where the ceiling is $103.74 and the floor is $96.14. A breakout above or below that trading range will lead to an acceleration in the same direction of the breakout. Until that breakout occurs, though, sellers are likely to enter the fray at around $103.74 and buyers will be trying their hand near $96.14.

The next upside target above $103.74 will come in at around $106 – the upper edge of the long-term uptrend channel. The next support below $96.14 would come into play in the area of $85-$90 (depending on the timing of the test of support), where the lower edge of the long-term uptrend channel comes into play.

Market conditions could continue to become more difficult, in which case Apple could drop to the low end of the recent range at $96.14. Buyers will almost certainly be trying to enter the stock at that level, with stops in place on a close below $96. Given the recent relative strength, sellers are less likely to be as bold with their moves if Apple makes it up to the $103.74 area.