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Apple (AAPL - Analyst Report) rallied sharply yesterday on the back of news that Carl Icahn had taken a large stake in the company. He called the stock undervalued and played up the idea of a buyback.

Technically, AAPL rallied and broke above a basing pattern. It looks ripe to reverse the downtrend which began in the fall of 2012.  The base formation spanned from about $385 to about $470.  Chart watchers probably see the base pattern putting the $550 area in play, and the chance for a material retracement of the decline from $705.

Fundamentally, AAPL holds an attractive valuation. It is trading with a PEG ratio of just 0.84 and a 12 month forward PE ratio of 11.5.  It is also priced at a relatively low 3.9 times tangible book value (the 10 year median is 5.5).  The trade is very sober about competitive pressures in the smart phone and tablet space.

AAPL is a major weight in key indices.  At the end of July, it was the largest weight in the S&P 500 ETF (SPY - ETF report) at 2.83%.  As of yesterday it was the biggest weight in the NASDAQ 100 ETF (QQQ - ETF report) at 13.1%.   A rally in AAPL could have a material impact on market psychology.   Strength in AAPL could also have a spill over impact on its suppliers.

RTI Question: Is AAPL on the cusp of a meaningful rally?   If so, is a rally in AAPL the catalyst for a sustained rally in the S&P 500 over 1700?

Zacks Releases Their 7 Best Stocks for August, 2014

These 7 were hand-picked from the list of 220 Zacks Rank #1 Strong Buys with earnings estimate revisions that are sweeping upward. Their stock prices are expected to rise sooner than the others.

Today, this Special Report is available to new visitors free of charge.

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RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%