Shares of Apple (AAPL) have traded to a low of $121.99 Wednesday following the company’s earnings announcement after yesterday’s closing bell. The 200-day moving average is at nearly $120.
The stock has held the 200-day moving average for nearly two years, and this technical level held when it was tested earlier this month. On July 9, shares touched a low of $119.22 before rebounding to push $133 this week.
In other words, it only took seven sessions before shares were back above $130. The stock was setting up for a “sell-the-news” event, regardless, as I predicted that the company would sandbag its forecast for the current quarter.
Apple beat on both the top and bottom line after reporting a profit of $1.85 a share on revenue of $49.6 million. The 4-cent beat and the $300 million revenue top were impressive, but guidance wasn’t. The company said it expects fourth-quarter revenue of $49 billion to $51 billion versus expectations just north of $51 billion.
I talked about the weekly option chain on Apple and profiled the AAPL Jul $124 puts and the AAPL Jul $135 calls ahead of Monday’s open.
Both options were trading for just over a buck ($1.05 apiece) coming into the week. The Jul $124 puts traded to a high of $2.68 shortly after the open, while the Jul $135 calls got punched in the face and are trading at a penny.
I talked about how the aforementioned weekly options would create a relatively “safe” strangle option trade, but I also said that shares would need to be below $122 or above $137 on Wednesday’s open.
I also thought that Apple shares could either fall or rise just slightly after the earnings news, causing the premiums in the aforementioned options to deflate and expire worthless. Although a strangle option trade is one trade, technically, it doesn’t feel too good when neither side of the trade pays off.
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