Once upon a time, Apple (AAPL) was a magical stock that provided a surefire avenue to outperformance. Its impressive alpha-generating powers attracted the masses to its ranks, making it both a hedge fund hotel and a destination of choice for the little guys. From late 2008 to its eventual peak in 2012, Apple’s relative strength climbed higher with nary a downturn.

And then, of course, it lost its mojo.

While Apple’s best days might be in the history books, the fallen rock star of yore is finally starting to show some renewed signs of strength. The month of May has done wonders in improving its posture.

For the first time since it began its harrowing descent, AAPL is now firmly established back above its 50-day moving average, which thanks to the bottoming-out action in the stock, is now going sideways instead of falling aggressively. Tack on the fact that the 20-day moving average is now rising respectably, and you can make the case that based on these popular smoothing mechanisms, AAPL looks quite healthy here.

Click to Enlarge Alongside the stabilization in its moving averages, the most prevalent pattern developing in AAPL is an inverted head-and-shoulders pattern. The higher pivot low (or right shoulder) formed this month reveals that market participants are becoming increasingly aggressive buyers. Of course, the pattern has one more step before completion. It needs to break above neckline resistance at $465 to officially confirm the bottom.

Click to Enlarge Further strengthening the case for an AAPL bottom is the positive action in the RSI. The impressive rally in mid-April from $385 to $465 was sufficient to lift the RSI indicator out of bear market territory for the first time since AAPL shares began their death spiral last year. Provided the RSI can remain above the 45-50 zone going forward, AAPL’s recovery has a good chance of coming to fruition.

What’s perhaps most impressive with AAPL this week is how well it’s behaving during the broad market correction. While the S&P 500 Index has fallen 3% from its intraday highs Wednesday, AAPL is down less than 1%, acting more like a safe-haven stock than what we’ve seen from it for many months.

Here are two plays worth consideration to exploit the turnaround story in AAPL:

Aggressive

If AAPL can break above the highs of the past week ($449), buy a July 450-470 bull call spread for $8. The max risk is limited to the initial debit paid, and the max reward is the distance between strikes minus the net debit, or $12. Consider exiting if AAPL falls below the right shoulder support level at $420 to minimize your loss.

Conservative

If you’re willing to bet AAPL remains above $400 for the next six weeks, sell the July 400-395 put spread for 75 cents or better. The reward is limited to the initial 75 cents received and the risk is limited to the distance between strikes minus the net credit, or $4.25. To reduce the loss in the position, consider exiting if AAPL breaches the $420 support level or if it reaches the short strike price at $400.

As of this writing, Tyler Craig did not hold a position in any of the aforementioned securities.