Apple Relative Strength Check: Yup, Still Strong

There’s a lot of buzz around Apple’s stock (AAPL – Quote) right now. Not bad timing heading into the holidays. And although Apple’s products have their place on any holiday wish list, it is their stock price that’s bringing the”cool” back to the company. And it is precisely this Apple relative strength that is reminiscent of 2010-2012 and has investors excited again.

In the chart below, I am highlighting the ratio of Apple’s stock price to the PowerShares QQQ Trust (QQQ – Quote). In doing so, we can see if Apple is rising faster (rising) or slower (falling) than the Large Cap technology sector. Looking at 2010 to 2012, you can clearly see the Apple relative strength to QQQ (and it brings back memories of how it would move the market all by itself). Fast forward to 2014, and once again Apple’s stock is powering higher and showing relative strength.

So how do we know when to be concerned? Well, aside from traditional valuation and technical/fundamental price targets, we can look for RSI divergences. In 2012, the stock was moving higher and outperforming QQQ. However, the Relative Strength Index (RSI) began to decline, forming a divergence and offering some caution to longs. Then in 2013 with the stock bottoming and underperforming QQQ, the RSI began to improve and move higher. This told bulls that the bottom may be nearing.

So what is it telling us now? Well the RSI is at 73.60 and still in an uptrend. It’s a bit overbought, but nothing yet to be concerned about for less active, longer-term investors. Perhaps that $150 price target that Chris Kimble wrote about last month will be in play some time next year.

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AAPL:QQQ Weekly Chart (2010-2014)

apple relative strength_aapl to qqq chart


Note that every investment needs a time frame, and it’s almost always a better bet to buy stocks on dips. The Apple relative strength chart above was a 5 year weekly bar chart, which would be considered a longer-term time frame. Thanks for reading and remember to always stay disciplined.

Follow Andrew on Twitter:  @andrewnyquist

No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.