Apple stock faces stiff resistance in the zone of $497 to $514. The reason is that Apple is still over-owned as well as overweight in many portfolios. It is difficult to say what retail investors will do when Apple stock approaches $500, but professionals who are overweight Apple stock are likely to lighten up. Such lightening up will create resistance.

Recently, I shared a short-term trade idea on Apple AAPL. So far, the trade is working out well, as shown on the updated chart. The target zone shown on the chart is also the resistance zone.

Please click here for the updated chart.

At the time of entry, it made sense to set the resistance zone as the target zone, as the probability of the stock flying through resistance was minimal. However, rumors of an iWatch may result in changing the target zone.

iWatch rumors have been around for a long time. But only recently did these rumors start gaining credibility, as both The Wall Street Journal and The New York Times have reported that Apple is working on a watch-like device. If the rumors gain hold and the resulting excitement lift sentiment on Apple, the probability of the stock flying through resistance will increase. We will be carefully watching the sentiment. If the sentiment significantly moves in the positive direction, the plan is to change the target to the second resistance zone.

It is too early to say if these rumors will take hold. On the one hand, Apple fans are eager for rumors of new-product categories from Apple….Read more at MarketWatch

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