- Apple stock has significantly outperformed the S&P 500 amid the rally from the mid-June bottom.
- That relative strength sets the stock up for more gains ahead, according to Bank of America.
- BofA sees potential for Apple to trade to the $230s, representing potential upside of more than 30%.
The most valuable company in the world could soon see big gains ahead if it continues to outperform the broader stock market.
That's according to Bank of America analyst Stephen Suttmeier, who said in a Wednesday note that Apple has a bullish technical setup that could send the stock to above $230, representing potential upside of more than 30% from current levels.
Suttmeier's favorable outlook on Apple is based on the stock hitting a new relative all-time high when measured against the S&P 500. The relative outperformance of Apple against the broader market has been impressive since the June 17 low, with Apple up 31%, more than double the S&P 500's gain of 15%.
"Renewed leadership on new all-time highs vs [the] S&P 500 provides a bullish leading indicator for the absolute price chart," Suttmeier said.
But stocks can't go straight up, and Apple is likely due for a period of consolidation to digest its recent gains. Suttmeier is closely monitoring Apple stock to see if it can hold above the $157 to $150 area in an eventual pullback, as that range represents various levels of technical support.
"Holding above or near the $157 to $150 area on dips would set up a bullish [inverse] head and shoulders continuation pattern," Suttmeier said.
The inverse head and shoulders takes its shape from a series of three bottoms, with the second bottom being the deepest. A neckline represents resistance and is formed by connecting the three recovery peaks associated with the three bottoms. That neckline currently stands around the $180 level.
When the stock breaks above its neckline, that triggers a buy signal for traders, with a stop loss level being set near the neckline breakout level. A measured move price target can be obtained by measuring the distance from the head to the neckline, and adding that to the neckline breakout level.
Using this methodology, if Apple stock can break above its December 2021 peak of around $183, Suttmeier expects a measured move price objective in the $230s for the iPhone maker.
Such a move in Apple would no doubt represent a bullish signal for the broader stock market and suggest that the current rally off the mid-June low is indeed the start of a new bull market rather than a bear market rally.
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