Apple (NASDAQ:AAPL) is on the move. On Wednesday, Nov. 17, the shares finally broke out of an earnings-induced trading range. The impact on sector performance was immediate and obvious. In fact, it helped the tech sector hold firm, even as heavy profit-taking pulled other areas lower. So, if you’ve taken your eyes off of AAPL stock, it’s now time to return.
To build the bullish case here, let’s take a closer look at this tech behemoth across multiple timeframes. For this analysis, we’ll take a top-down approach, moving from the weekly down to the hourly.
Here’s what you should know about AAPL stock moving forward.
The Big Picture for AAPL Stock
Currently, AAPL stock is up about 16% year-to-date (YTD), which isn’t all that impressive compared to the profits reigning down elsewhere. For example, the S&P 500 is up 25% while the tech sector is up roughly 30%.
Despite this underperformance, though, the weekly trend remains bullish. We have a series of higher pivot highs and lows, with prices above the 20-week, 50-week and 200-week moving averages. Although momentum hasn’t surged or been as impressive as the ascent in semiconductors, it also hasn’t flashed any warning signs. Over the past six weeks, AAPL stock has quietly climbed back to resistance and now sits within striking distance of its old peak.
So, with the big picture now properly framed, let’s drill into the daily timeframe.
The genesis of Apple’s recent trading range dates back to last month’s earnings report. Prices broke out right in front of the news and then gapped lower the following day. That rug-pull put optimism on ice — and it’s taken three weeks for bulls to find their footing. Meanwhile, the 50-day moving average turned sideways to reflect the lost momentum for the intermediate trend. That said, one bright note during the pause was the lack of distribution days. Occasional down days that cropped up lacked strength and made it easier to bet on an eventual upside breakout.
Resistance at $152.50 held firm throughout the consolidation, making it the obvious level that needed to be taken out before momentum returned. Yesterday, we saw just that. The 1.65% rally made AAPL stock a standout during a session that saw most sectors falter. Volume swelled past 88 million shares, making it the most active trading session since earnings.
Although AAPL may lack the exciting momentum of its earlier years, the stock makes up for it with its more consistent movements. Yesterday’s breakout was as clear a signal as you’ll see that a new upswing is beginning.
At the risk of over-analyzing, let’s take a brief look at the hourly chart.
AAPL Stock: The Hourly and a Trade
Moving to a smaller timeframe brings more detail to the picture. Patterns that may not have been as apparent often become clearer. To that end, here are three key developments that catch my eye on the hourly chart.
First, the earnings rug-pull that denied last month’s breakout attempt.
Second, the ensuing weeks of sideways movement between $146 and $152.50.
And third, yesterday’s final success with breaking the range and starting a clear hourly uptrend.
The options market provides many ways to capitalize on a year-end ramp in AAPL stock. Due to the lower implied volatility, let’s go with a bull call spread.
The Trade: Buy the Dec $155/$160 bull call for $1.75
You’re risking $1.75 for the chance to make $3.25 if prices rise past $160 by expiration. If you want to make the trade more conservative and give AAPL more time to make the move, consider January options. The trade-off is that your profits will come slower.
On the date of publication, Tyler Craig was long AAPL. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
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