Apple’s Size May Act as a Barrier to Further Share Price Gains

Apple Inc is in danger of becoming such a large portion of the Standard & Poor’s 500 Index that some asset managers may be forced to sell shares due to concentration rules they employ.

Apple may soon make up more than 5 percent of the market capitalization of the benchmark U.S. stock index, if the computer maker continues to appreciate at a faster rate than the broader market. Many funds that track the S&P 500 as a benchmark have restrictions on the size of each of their individual holdings, with 5 percent often the largest allowable allocation for a single security.

Looking at the daily price chart of Apple we can see how it sold off from the April 10 high of $644 to retrace 38.2 percent of the move higher from the low on Nov. 25, 2011, filling several exhaustion gaps along the way. Since then the share price has recovered and is now trading just below its recent high with a retest of this level likely.

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