Dominance in a market can be really sweet. But it doesn’t last forever, and sometimes things can go sour — something Apple (AAPL) has been wrangling with in recent weeks.
Still, active traders in AAPL stock shouldn’t let a bearish price chart distract them from the business of making money.
Apple owns roughly 25% of the mobile handset market in China. That’s good on one hand, but since reporting a marginal sales miss last month, investors have grown increasingly concerned of a saturated market for those devices.
Overnight, worries of future sales growth and market share for Apple (and the impact that had on AAPL stock holders) was made potentially more problematic by China as the country moved to devalue its currency.
The action by China’s central bank makes imports like the iPhone more expensive — and based on Apple stock’s swoon of around 3% this morning, it appears the news is being heeded by more than a few investors.
Apple Stock Daily Chart
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Shares of Apple stock are off around 3%, confirming weakness under the 200-day simple moving average — where many technicians believe the bears live.
Looking closer at the provided daily chart of Apple, there’s also additional technical evidence supporting weakness in AAPL stock and lower prices to come. We can see how instrumental two former support lines have been in stopping Apple shares in their tracks once broken.
Monday’s highs finished right up against horizontal resistance comprised of a key July pivot low and prior all-time high set late last year. A separate angular support line acted as resistance once broken on a bearish post-earnings gap, when traders attempted to shake off Apple’s report and — either optimistically or blindly, depending on your point of view — buy the dip.
Lastly, the recent break lower through the 200-day SMA into bear territory and subsequent small counter-rally into resistance has the looks of a bearish flag pattern. If nothing else, the pivot high — or better yet, a stop slightly above the long-term moving average — can be used for managing bearish positions.
AAPL Stock Bear Put Spread
After reviewing Apple’s available options, one spread I like is the weekly Aug 28 $120/$115 bear put spread for $2.65. The sale of the
With AAPL stock near $116.55, the sale of the lower and still out-of-the-money $115 strike allows the trader to breakeven at $117.35 at expiration, which is a bit more than two weeks out.
After reviewing Apple’s available options, one spread I like is the weekly Aug 28 $120/$115 bear put spread for $2.65. The sale of the lower and still out-of-the-money $115 strike allows the trader to break even at $117.35 at expiration, which is a bit more than two weeks out. At current prices, the trader would net around $1.30, for a return of nearly 50% for the holding period.
If AAPL stock finishes below $115, this spread will stand to profit by $2.35.
In the event the described bearish technical case for Apple stock takes a turn for the worse above 200-day SMA resistance, a stop-loss at $121.55 will act to minimize the spread’s maximum loss of $2.65 to roughly 50%.
Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.
