Tech stocks are making a comeback, and Apple (NASDAQ:AAPL) is in the thick of it. The maker of all i-Things just topped off a six-session win streak. AAPL stock popped above a pivot high in the process, signaling its official return to an uptrend. That means it’s high time to deploy bull trades for what could be a ramp into year-end.
This week saw the Nasdaq climb to a fresh record high on the back of obvious rotation back to technology. On Thursday, the Index registered its seventh straight daily gain. Skeptics are calling for a pullback in response to the short-term overbought conditions.
Meanwhile, fanboys are cheering the push to all-time highs and suggesting it’s a sign of more gains to come. Both camps make fair points, but it’s the optimists that hold the upper hand. If 2020 has taught us anything, it’s that you don’t bet against momentum.
Even if the tech sector were only putting up mediocre numbers of late, I’d still give bulls the benefit of the doubt if for no other reason than the calendar. Christmas is coming around the corner, and it has a strong history of bringing profits to all the good little boys and girls on the Street. In the absence of an obvious catalyst that could weigh on stocks, I see few reasons to try our hand at picking tops.
With these themes in mind, let’s take a fresh look at the AAPL stock chart.
Behold, the Bulls’ Return
To tune out the noise of the daily view, let’s start with the weekly time frame. Say what you will about the messiness of the last two months, but it has been very constructive as far as the big picture is concerned. From a pattern perspective, a clean ascending triangle has formed. The series of higher swing lows confirms the long-term uptrend remains well intact, despite the recent choppiness. You’ll also note that support developed right at the 20-week moving average on both tests. That’s not bearish!
The past few months of Apple’s meandering hasn’t been because of heavy sellers entering the field as much as it’s been because buyers have stopped pressing their advantage.
Now that we’re pushing above the weekly pivot of $122, however, the bulls are back. I’d say a run to $130 by the end of the month is likely.
If you want a more vivid depiction of the recent triangle formation, consider the provided daily chart. The most important tell during the entire episode was that the series of higher pivot lows revealed the increased demand developing beneath the surface. This week’s awakening saw a bump in volume to confirm institutions were returning to the fray.
AAPL Stock Call Spreads Look Great
August’s 7-for-1 stock split cheapened Apple’s share price, making long equity plays reachable for the little guys. But for those wishing for a more leveraged play, bull calls are worth a shot. The lower implied volatility rank of 21% works to the advantage of long premium plays by creating a more asymmetric reward-to-risk ratio.
For instance, if you think prices can rise past $130 by year-end, you can purchase the 31 December $125/$130 call vertical for $1.50. The max loss is limited to the initial $150 and will be forfeit if AAPL stock sits below $125. The max gain is capped at $350 and is yours to keep if prices are north of $130. Risking $150 to capture $350 translates into a tasty return of 233%.
On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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