The eclipsing of a $1 trillion market cap has done little to deter hungry buyers from gobbling up Apple (NASDAQ:AAPL) shares. The tech titan is up 13% in the last month and shows few signs of slowing down. With momentum beneath its wings and a shallow pullback now formed, the time for new AAPL stock trade might be … now.
AAPL Stock Charts
To properly set the table for what could be a tasty trade idea, let’s break down the weekly and daily time frames.
Momentum can be expressed as the distance between pivots. In an uptrend, we focus on the pivot highs. Note how the last four peaks in Apple’s weekly chart are moving further apart. This confirms that buying aggression is rising. The RSI indicator has notched new highs alongside price which reinforces the momentum surge.
While the weekly chart is flashing overbought signals, any and all dips in what is such a strong trend should be viewed as gifts to be bought. The overbought signals from Q1 2017 serve as an insightful case study. Instead of a large pullback, AAPL stock simply retreated slightly before buyers pushed it higher.
Turning to the daily chart reveals two pausing patterns that have formed since the earnings gap. The first took on the form of a high base that delivered a rousing breakout play. The second is a bull flag that appears on the cusp of completion today. I count the fact that AAPL stock can’t drop more than two days before buyers rush in even after such a substantial price rise as a very bullish omen.
The Apple Stock Trade Idea
Bull call spreads provide a straightforward way for betting on higher prices. Buy the Oct $215 call and sell the Oct $225 call for a net debit of $4.65. The initial cost represents the risk and will be forfeit if Apple sits below $215 at expiration. The potential reward is $5.35 and will be yours if the stock rises above $225 by expiration.
Rather than going for max gain, I suggest exiting into strength if AAPL touches $225 in the coming weeks.
As of this writing, Tyler Craig held neutral option positions in AAPL. Want more education on how to trade? Check out his trading blog, Tales of a Technician.
