Friday’s TSX breakouts: This market leader has 44 ‘buy’ calls and a bullish ‘golden cross’

Today, key data to note is U.S. August consumer price index data as well as U.S. consumer sentiment data.

This morning, the price of oil is, once again, under pressure.

On Thursday, major North American equity markets climbed higher as key U.S. economic data pointed to a sluggish economic recovery lifting the odds that the U.S. Federal Reserve will not raise rates next week. For instance, U.S. industrial production declined 0.4 per cent month-over-month in August and U.S. retail sales slipped 0.3 per cent month-over-month in August. According to Fed funds futures contracts, the probability of a rate hike announced on September 21 has fallen to just 18 per cent. With the Fed likely on hold, this has provided fuel to drive equity markets higher.

In the U.S., the Dow Jones Industrial Average jumped 0.99 per cent with every single stock in the Index closing higher for the day. The S&P 500 Index rallied 1.01 per cent, and the Nasdaq composite index climbed 1.47 per cent.

In Canada, the S&P/TSX composite index added 137 points, or 0.96 per cent to close at 14,504. There were 172 securities in the TSX Index that advanced, 64 securities declined in value, and four stocks closed the day unchanged.

The S&P/TSX composite index is down 0.65 per cent month to date with just one sector in positive territory, the materials sector, due to the rally in gold stocks. The index is up 3.12 per cent quarter to date, and has a gain of 11.48 per cent year-to-date.

On today's TSX Breakouts report, there are 24 securities on the positive breakouts list (stocks with positive price momentum), balanced by 26 securities appear on the negative breakouts list (stocks with negative price momentum).

While I have never discussed U.S. stocks and have no immediate plans to screen U.S. companies, this stock warrants an exception in my opinion. Discussed today is a stock that if I screened U.S. companies would appear on the positive breakouts list. It trades at an attractive valuation, pays investors a reliable dividend, and is a market leader. The security highlighted today is Apple Inc. (AAPL-Q). Today, marks the official launch date of the new iPhone 7 and iPhone 7 Plus.

A brief outline is provided below that may serve as a springboard for further fundamental research.

The company

Apple designs, manufactures, and retails technology devices such as computers, smartphones, tablets, and watches. The company also provides services such as the App Store, Apple Music, and Apple Pay.

After the market closed on July 26, the company reported better-than-expected third quarter fiscal 2016 results. Earnings per share came in at $1.42, above the consensus estimate of $1.39. Revenue was $42.4-billion and gross margins were 38 per cent. The company has a solid balance sheet and ended the quarter with $231.5-billion in cash plus marketable securities. The share price rallied 6.5 per cent the following trading day.

Management has provided guidance for the fourth quarter, expecting revenue to fall between $45.5-billion and $47.5-billion. Gross margins are anticipated to be between 37.5 per cent and 38 per cent.

On Sept. 7, the company announced a new iPhone 7 and iPhone 7 Plus will be available in more than 25 countries on September 16, and reports of strong demand for the new phone have rejuvenated the stock price.

Returning capital to shareholders

The company pays its shareholders a quarterly dividend of 57 cents per share, or $2.28 on a yearly basis. This equates to an annualized dividend yield of 2 per cent.

Management is committed to returning capital to its shareholders. The company has announced a dividend increase in April of every year since 2013.

Last quarter, the company repurchased 41.2-million shares.

Valuation

Shares of Apple are trading at a price-to-earnings multiple of 12.8 times the fiscal 2017 consensus estimate. Over the past five years, the stock has traded principally in a range between 9 times and 14 times. The historical five-year average P/E multiple is 11.3 times.

Analysts' recommendations

According to Bloomberg, 44 analysts have 'buy' recommendations, six analysts have 'hold' recommendations, and three analysts have 'sell' recommendations.

The average one-year price target is $125.84, suggesting the stock price could appreciate approximately 9 per cent over the next 12 months.

The consensus EPS estimate is $8.24 in fiscal 2016, and forecast to rise 9 per cent to $9.02 in fiscal 2017.

Chart watch

Year to date, the stock price is up just under 10 per cent, outperforming the Nasdaq which is up 4.8 per cent. However, the stock's year-to-date gain has been realized mainly in the past week. Month to date, the share price is up 9 per cent.

The share price recently broke out of a downtrend that had been in place since the summer of 2015.

At the beginning of the month, the shares experienced a bullish technical pattern called a "Golden Cross". This occurs when the 50-day moving average crosses above the 200-day moving average. There is initial overhead resistance at $120, and after that in the $130 to $133 range.

There is initial downside support at $105, close to the 50-day moving average (at $104.82), and failing that, there is support at $100.

The shares of Apple are in overbought territory with the relative strength index at 72. Generally, a reading at or above 70 indicates an overbought condition. That being said a stock can remain in overbought territory for some time.

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The Breakouts file is a technical analysis screen intended to identify companies that are technically breaking out. In addition, this report highlights a company's dividend policy, analysts' recommendations, and provides a brief technical analysis for a security to provide readers with more information.

If a stock appears on the positive breakouts list, this indicates positive price momentum, and that a company may be worthwhile for investors to look at the fundamentals in order to determine if the recent price strength is warranted and will continue. If a security appears on the negative breakouts list, this indicates negative price momentum, and may be indicative of either deteriorating fundamentals or perhaps indicates a buying opportunity.

Securities screened are from the S&P/TSX composite index, the S&P/TSX Small Cap index, as well as Canadian small cap stocks outside of these indices that have a minimum market capitalization of $200-million. Securities appearing on the list are technically breaking out, reaching new 55-day highs or lows. Securities on the positive breakouts list have displayed positive price momentum during this period. Securities on negative breakouts list have experienced negative price momentum.

A technical analysis screen does not replace fundamental analysis, but can help identify companies worth having a closer look at.