OPTION TALK: Is the Apple Green?
Email This Article
Print This Article
Digg This
Delicious
SubscribeMOST POPULAR ARTICLES
- Kaeppel's Corner: Catching Up on a Few Ideas
- Weekly Outlook: March 22, 2010
- Closing Wrap-Up, March 19
- Foreign Exchange: The Running of the Bulls
- Volatility Alert: Fear Indices Fall to Support as Stocks Rise
- AU Editorial: What If?
- Midday Action: March 19
- AU Editorial: Elliott and Its Ways
- Market Trends: Boomer Time Horizons, Part 2
- Growth Stock Swing Option: March 18, 2010
- Weekly Outlook: March 22, 2010
- Foreign Exchange: The Running of the Bulls
- AU Editorial: What If?
- Midday Action: March 19
- Growth Stock Swing Option: March 18, 2010
- Market Trends: Boomer Time Horizons, Part 2
- Economic Watchdog, March 18
- Midday Action: March 18
- Midday Action: March 17
- Kaeppel's Corner: Catching Up on a Few Ideas
SPONSORED LINKS
April 6, 2007
Apple Inc (AAPL) is a very popular stock with a well known brand name. This week’s article will shift focus and show some simple technical setup techniques that can be used to rate the potential move of this stock. An options strategy will then be chosen to trade this move.
Chart 1 shows how similar price ranges are consistently occurring in AAPL. The arrows illustrate this pattern and the last 4 major price moves have produced very similar price ranges of around $20. The final arrow has projected the current move from $83.00 on February 28th, 2007 to be around $103.00 in price. Bearing in mind that earnings are due on April 25th and AAPL has a history of moving higher prior to earnings, this target price looks possible.
Chart 1 – AAPL Daily Bar Chart
Changing to a weekly chart shows a large ABC range terminating at $103.43 which is in line with the daily projected price target of around $103.00. This is known as a clustering of price and is a good sign that a stock can get to the projected level. This is illustrated in Chart 2.
Chart 2 – AAPL Weekly Bar Chart
Looking at the various options available, a Jul07 95 Call option can be traded. Chart 3 highlights the risk graph of the trade. If the price target of approximately $103 is reached within 29 days, a nice profit of $560 or 81% ($560/$690) can be made. It would be important to keep aware of the upcoming earnings date of April 25th and profits taken early if AAPL trades up into this time.
If the trade does not continue its upward momentum, then exiting the trade if the stock trades back to around $87.50 would be a prudent action. This price is a good distance from the 50% level of the current range from $83.00 (February 28th) to $96.83 (March 27th). 50% is always a key level to watch as it will act as support in a trending market. In addition, a price of $87.50 would equate to approximately $345 being half the cost of the trade.
Chart 3 – AAPL Risk Graph
Trading is about finding good opportunities and part of this equation is to look for stocks that “fit a personality”. It seems that Apple (AAPL) currently likes the $20 price range and this fits well with the longer term price target based off the weekly chart. The question must always be asked, “What if I’m wrong?” By having a solid trading plan with well defined profit and stop loss targets, the trader will always be on top of the game.
Manage Your Risk!
Oscar Lee
Trading Tutors
© Copyright 1995-2010 Optionetics. All rights reserved. This material is for personal use only. Republication and re-dissemination, including posting to newsgroups, is expressly prohibited without the prior written consent of Optionetics. Optionetics is a registered trademark of Optionetics, Inc.