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One stealth technical indicator could be key to next move in Apple rally

VIDEO2:4502:45
Look at pullbacks in Apple shares as buying opportunites: Market expert

Apple, the top Dow stock in the past year, could have more room to run.

One trader says the charts are pointing to even more records for shares even after an 86% rally in 2019.

"I have a price target of $324 out there for Apple," Bill Baruch, president of Blue Line Capital, said on CNBC's "Trading Nation" on Friday. "This chart is really great."

Baruch isn't alone. Bank of America and RBC Capital on Friday upped their price targets to $330 a share, implying 11% upside from current levels.

Baruch says he's looking beyond the price action and fundamentals to a below-the-surface technical indicator as a signal of Apple's next upward swing — the average directional index, or ADX.

"Look at the ADX which shows how strongly a chart is trending — whether directionally up or down. It peaked last year in September. We've had a lower peak since then. It actually just broke out of a trend line on the ADX and I think there's room to extend. That's going to pave a path of least resistance higher," said Baruch.

He notes that any pullbacks should be used as buying opportunities. The stock fell 1% on Friday, swept up in a broader market sell-off.

Chad Morganlander, portfolio manager at Washington Crossing Advisors, is hesitant on the large-cap tech stocks as a whole after such a massive run.

"This outperformance over the last 12 months for the tech sector — up 50% — valuations are somewhat stretched with a forward looking P/E multiple for the XLK [tech ETF] of roughly about 22 times. So we would be either neutral to underweight group," Morganlander said during the same segment.

By comparison, the broader S&P 500 trades at 18 times forward earnings.

However, Morganlander sees opportunity in a few tech stocks.

"If you're looking for value companies within the tech sector, look no further than Oracle and Cisco. Both of those companies are trading at about 11 times enterprise value to EBIT which is remarkably cheap based off of their expected and embedded growth rates," he said.

Disclosure: Washington Crossing Advisors holds CSCO and ORCL.

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