Not only has Warren Buffett bought more Apple stock, he has been promoting the purchase with full force. Apple’s stock, as a result, has jumped.

The day before the news of Buffett’s Berkshire Hathaway BRK.B,  buying more Apple AAPL, stock broke (May 4), I wrote a column titled “There’s evidence that Apple’s stock could finally break out.”

No, Buffett did not call me before he unveiled the news. It is simply that I have been reading charts for over 30 years and can understand stock patterns. Furthermore, algorithms at The Arora Report showed several times during the first quarter that the smart money (professional investors) was buying Apple.

Investors are buying Apple stock hand over fist after Buffett revealed his additional purchases. But before you jump into Apple stock now, consider five points that may give pause, even to Buffett admirers like me. Let’s start with a chart.


Please click here for an annotated chart of Apple. For the sake of full transparency, this is exactly the same chart, without any changes, that was published the day before Buffett’s announcement. Please note the following from the chart:

• During the first quarter, Apple traded as low as $155.03 and appears to have traded close to $150 during the time outside regular trading hours.

• Buffett did not buy Apple stock around $185 but likely much lower.

• Buffett is already sitting on a nice gain on his newly bought Apple stock. The more he talks about Apple stock, the bigger his gain gets. Buffett, in other words, is talking up his own book.

• The chart shows that the volume during the period Buffett bought Apple stock was low. In the low-volume environment, it appears that about one in 10 shares were bought by Buffett or by Apple. Apple has an active share-repurchase program in place.

• Without buying by Buffett and Apple, Apple stock would likely have not rallied and may have even declined.

• Not shown on the chart (because it has been left unchanged for full transparency), but discernable from the chart, is the $171.48 level. This is the average price that Apple appears to have paid for the shares that it bought.

• The horizontal resistance line shown on the chart has been broken but not decisively.

• The resistance shown on the chart formed by the upper trend line has been touched but not decisively broken….Read more at MarketWatch.

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