- Apple is still indecisive and stalled near all-time highs.
- AAPL stock is ready to break out of a tight range.
- Apple stock closed flat on Friday.
Apple continues to consolidate just under all-time highs and prepare itself to break out of a tightening range. The recent price movements, except for Thursday, have been in a tight range with few strong moves seen on any day. Friday was no different and Apple stock closed at $149.10 for a change of just +0.1%. The stock remains poised to break out and target all-time highs at $150. The recent run of low volatility and low daily trading range has seen Apple form a wedge formation. Friday saw Apple trade up to the top of this wedge, so will the stock push on and break through or retreat? FXStreet still favours the more bearish arguments, but our patience is being stretched. Monday can usually be a tough day for equities and historically is one of the worst for equity performance, so let us see if this and other headwinds combine to send Apple lower. Either way our options call from last week continues to work well. We called a strangle play to benefit from a breakout higher or lower. Strangles involve buying a put and call for the same expiration but with different strikes. They are useful if you expect a stock to breakout but are not sure which direction. A breakout is usually preceded by a period of consolidation and low volatility, which reduces option premiums.
Apple key statistics
|Market Cap||$2.5 trillion|
|Enterprise Value||$2.3 trillion|
|52 week low||$89.14|
|52 week high||$150|
|Average Wall Street rating and price target||
Apple stock forecast
We will hold on to our bearish view but are growing less and less convinced. As ever it is a lesson to make sure you have stops and good risk management in place. No one gets every call correct, so it is important to control the ones you get wrong so you can try again.
Thursday's move was the impressive one with a move to the top of the wedge formation. Friday was a mere blip will little activity, but Apple did hold Thursday's gains. A breakout of the wedge and all-time highs at $150 should happen next, meaning our call is clearly wrong. Thursday also saw a breakout from the bearish divergences we had witnessed in the Relative Strength Index (RSI) and Commodity Channel Index (CCI). The Moving Average Convergence Divergence (MACD) remains bearish though. Our bearish trigger at $141.67 looks further and further away, but if it does break the double top at $150 will be in place and that is a strongly bearish strategy.
We remain bearish due to the possibility of the double top being triggered, the negative reaction to the strong earnings and bearish comments from the conference call. Tech looks like it may be struggling for momentum as rates pop, but we are waiting until a break of $141.67 to get involved. Until then our options strangle continues to work well, returning over 60% in the two days since we made it. Breaking $150 is the signal to think about getting involved on the long side. Breaking $141.67 is the signal to think about getting involved on the short side.
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