After a string of spectacular investments, Carl Icahn tweeted on Tuesday at 2:21 p.m., “We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come.”  Apple stock was trading at $475.81 just before his tweet and shot higher right after his tweet.

Icahn had previously stated that he would announce his next major investment on Twitter; therefore investors were on high alert.  Four minutes later, Icahn added fuel to the fire with another tweet: “Had a nice conversation with Tim Cook today. Discussed my opinion that a larger buyback should be done now. We plan to speak again shortly.”  The stock ran up to $494.66 before giving up some of the gains and closing at $489.57, up $22.21 for the day.

Should investors follow Icahn into Apple stock?  For an answer, consider the following factors.

Technical Picture

Apple shares have reclaimed their 50- and 200-day moving averages in the past three weeks.  This is positive, but the stock faces heavy resistance in the zone of $510 to $530. Think of two different types of investors: short-term traders who jumped in on the Icahn news, and long-term investors who are sitting on unrealized losses. When Apple stock was falling, heavy buying occurred in this zone. The investors who bought there may start selling or lightening up when they reach breakeven.

Unless there is solid news on new products, the stock will have difficulty overcoming this resistance. In the absence of excitement about new products, the stock may reach the resistance zone on exuberance about Icahn, but then back off to under $500. It is worth noting that the rumor mill is full of potential announcements regarding a low cost iPhone, iPhone 5S, and a thinner iPad… Read more at Forbes