The market has been kind to Apple Inc. (NASDAQ: AAPL) over the last few days as the stock has popped just under 4% from the $240 level. Helping matters today was Steve Jobs’ presentation on the new products coming down the pipeline from the gadget gurus at Apple. But, for those that might be thinking about taking a bite at the stock, you may want to wait based on the technical picture.
The stock appeared on our radar last week as a short candidate as it was applying pressure to the technically significant $240 level. Since then, the stock has bounced right into overhead resistance drawn by an effective combination of the stock’s trendlines and options activity.
First, the technicals. In early August, AAPL’s 20-day moving average crossed below its 50-day, indicating that the stock was in the process of an intermediate-term rollover into a bearish patter. This occurred as the stock was breaking through the $250 level after topping out over $270 in June.
Now, the 20-day moving average is in a declining patter that intersects with the $250 level, suggesting that the stock will have some trouble breaking much higher.
Adding to the potential for resistance is the current options picture. Taking a look at the current call open interest, the 250 strike is home to a large amount of call open interest, which often acts as resistance for the underlying stock.
The chart below displays the current open interest for AAPL”
Historically, the combination of a downtrending technical picture and overhead resistance from large amounts of overhead call open interest similar to the situation that has developed for Apple. For now, the aggressive traders will want to consider short position on the stock.
Those more conservative traders that have been considering the purchase of Apple shares may want to hold off for a better price as the near-term outlook is calling for lower prices.
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