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Why Apple share price could hit a roadblock soon

One top US market analyst warned that the massive Apple stock ‘might become a victim of its own success’.

US technology company Apple Inc is the growth stock that keeps on growing, as it continues to see share price gain month-on-month.

The blue-chip stock has added another four percent to share price, since a previous update. It is currently trading at an all-time high of US$280.09 per share as of Monday evening, up from US$264.99 recorded on 05 December.

Just this year alone, the stock has skyrocketed 74%, adding US$473 billion to its market capitalisation in the process.

How much higher can share price go?

However, the bubble might deflate a little in the new year, at least according to JC O’Hara, chief market technician at MKM Partners.

He cautions that the company’s growth momentum could hit a brick wall soon.

‘Momentum is definitely strong, and our concern is that it actually might be too strong, leaving Apple vulnerable,’ O’Hara told CNBC’s ‘Trading Nation’ on Friday, 17 December.

‘If you look at where Apple’s trading, especially compared to its 200-day moving average, we find it’s 28% above that. The average S&P 500 stock is just 5% above its 200-day moving average.’

He also noted that based on historic figures, Apple’s stock tended to be vulnerable in the subsequent months following a peak.

‘While we’re not negative on Apple, we just think it might be vulnerable for a little back-and-filling because it might become a victim of its own success here,’ he added.

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Positive US market outlook

So far, however, that has yet to happen, judging by how the tech giant’s share price ended Monday’s market on yet another record high.

Furthermore, with US and China having reached a consensus on trade tariffs, general stock market uncertainty appears to be low in the US at present, based on the Volatility Index.

The index, which measures investors’ market expectations for volatility over the next 30 days on the US S&P 500, currently stands at around 12, several points higher than its historical low.

Many US analysts believe the trade agreement will continue to have a positive effect on the domestic market in general – and this includes companies like Apple.

One of them, Vincent Reinhart, chief economist at Bank of New York Mellon Corp, said the interim trade deal ‘reverses some things that were bad’, namely the tariff increases, which is ‘good for the outlook’.

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