- Apple shares bounce on a strong day for equities.
- AAPL stock closes at $148.89, up 2%.
- AAPL poised near all-time highs at $150.
Apple stock put in a pretty decent performance on Thursday with a strong surge to end the day up slightly over 2%. In the process, Apple pushed closer to all-time highs at $150 and puts our double top thesis in jeopardy. We have, however, cautioned that the double top was yet to trigger and would need a break of $141.67 to confirm it. This has yet to happen, so all bets are off. On Thursday we identified the small flag or pennant formation that has been forming lately due to the restricted volatility and small daily ranges. We also mentioned that eventually, a consolidation phase like this one leads to a breakout. The consolidation is a coiled spring waiting for a catalyst to move powerfully in either direction. In this case, a pennant or flag formation is a continuation phase, and the recent phase has been bullish. Based on this, technical analysts would expect Apple to break out and make fresh all-time highs above $150. However, we are not yet fully convinced of this at FXStreet. On Thursday we mentioned two nice potential option plays to benefit from a breakout in either direction: "A $135 put for August 27 costs about $0.30 cents per share. If Apple breaks $141.67 it should move pretty quickly toward $133.80. If you are bullish and see a breakout to new highs then a $155 call for August 27 costs $0.19 cents per share".
How have we done? The move on Thursday has seen our $155 call treble in value, yes a 200% gain in one day to $0.60. Our $135 put has dropped from $0.30 to $0.23, so a 7 cent loss versus a 41 cent gain on the call, so a 34 cent combined gain on the strangle strategy or 68% gain in one session. Happy days!
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Apple key statistics
| Market Cap | $2.5 trillion |
| Enterprise Value | $2.3 trillion |
| Price/Earnings (P/E) | 29 |
|
Price/Book |
38 |
| Price/Sales | 9 |
| Gross Margin | 41% |
| Net Margin | 25% |
| EBITDA | $112 billion |
| 52 week low | $89.14 |
| 52 week high | $150 |
| Average Wall Street rating and price target |
Buy $165 |
Apple stock forecast
We remain more bearish on our view, but yesterday's move was an impressive one and warrants caution. However, we have not yet initiated our bearish call and are waiting for a break of $141.67 to unleash the bears. Thursday has seen a potential running of the bulls with a move up to the top of the flag trend line, see chart below. A break and all-time highs at $150 should break next, meaning our call is clearly wrong. Thursday also saw a breakout from the bearish divergences we had witnessed in the Relative Strength Index (RSI) and Commodity Channel Index (CCI). The Moving Average Convergence Divergence (MACD) remain bearish though. Our options strangle call from yesterday has worked extremely well though. Strangles (buying a put and buying a call) are a very useful strategy when you anticipate a breakout but are not sure which direction. Apple had a few days of very low activity with tiny moves, which meant options volatility dropped and made option prices cheap. It was the perfect time to buy some.
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