Apple (AAPL) stock has been blazing its own path for weeks now. Previous to Monday that was a bad thing — while the rest of the Nasdaq was hanging near all-time highs, AAPL was falling day after day.
The relative weakness beast had sunk its vicious teeth into Apple and just wouldn’t let go.
Until yesterday.
It appears Apple stock’s New Year’s resolution was not to suck for a spell. And despite a hellish open, AAPL was able to claw its way back into positive territory by day’s end, making it one of the only green stocks in a sea of red.
Based on yesterday’s price action, it certainly seems a tradable low could be in place for Apple stock price. For starters it ended with an insanely bullish candlestick, one of the best.
After falling for a nanosecond at the open, AAPL ripped higher all day long. The only thing that stopped its ascent was the closing bell. That’s about as bullish as price action gets.
Yet a second development in favor of buyers here is the sharp uptick in volume. Monday scored one of the strongest accumulation days in months, showing that institutions viewed the down gap as a gift from the gods and swiftly bought with both hands.
If you’ve been waiting to dip your toes into AAPL, wait no longer. If you’re looking to bail at the first sign of trouble, consider using Monday’s low of $102 as your stop loss.
The Apple Stock Trade
One of the best trades on the board to score big on further recovery in AAPL is the bull call spread. We can structure the option position to double our money should Apple stock simply rise a few percentage points higher in the coming month.
Buy the Feb $105/$110 call spread for $2.20 or better. The max loss is limited to the initial $2.20 debit and will be lost if the Apple stock price sits below $105 at February expiration.
The max gain is limited to the distance between strikes minus the net debit, or $2.80, and will be captured if the Apple stock price can rise above $110 by expiration.
The spread also positions you to capture any kind of upside gap following Apple’s upcoming earnings announcement.
Tyler Craig had no positions on any of the aforementioned securities.
