Here is your Bonus Idea with links to the full Top Ten:
Apple (NASDAQ:AAPL) was the first company to be valued at $500 billion which naturally brought on the calls for the first $1 trillion company. Easy does it people. Going from 50 to 100 million is a lot easier than from 50 to 100 billion which is kids play compared to going from 500 billion to a trillion. It could happen but is not likely over the next 6 months.
So while we wait let’s look at the shorter term timeframe. The company made their annual product announcement last week and the stock reacted by basically not reacting. It continued to consolidate in the ascending triangle under resistance at 115. There is resistance above 115 at 119.50 followed by 122 and 125.80. Support lower comes at 112 and 110 followed by 107.5 and 103.50.Short interest is low at 1.4%.
The pullback that reached its bottom August 24 retraced 50% of the leg higher from June 2013 with an immediate bounce and settling over the 38.2% retracement. Since that bottom the MACD crossed and has been rising, creating a positive divergence. The RSI is also rising and cracking through the mid line on its way to the bullish range.
The options chain shows very large open interest this week at both the 115 and 120 Strikes with substantial open interest at 110 below as well. But this give a slight upward bias this week, and more if it gets over 117. The October chain is definitely weighted to the upside and on the call side. The October 23 Expiry may be more important though as it will cover the earnings release on the 20th. So far there is little activity there.
- Trade Idea 1: Buy the stock on a move over 115 with a stop at 109.50.
A straight stock trade. - Trade Idea 2: Buy the stock on a move over 115 with an October 23 Expiry 115/105 Put Spread (offered at $3.40 late Friday) and sell an October 120 Covered Call ($1.80), a collar.
Adding downside protection through earnings and selling upside to pay for it. - Trade Idea 3: Buy the October 115 Calls ($4.00).
A defined risk way to participate in the upside. - Trade Idea 4: Buy the October 105/115/120 Call Spread Risk Reversal (50 cents).
A 115/120 Call Spread selling the 105 Puts, gives 10:1 reward to risk on the upside but exposes you to owning the stock at 105. - Trade Idea 5: Buy the November 115/October 120 Call Diagonal ($4.35) and sell the November 100 Puts ($2.52 credit).
Gives longer term upside with potential to own the stock at 100 on a pullback.
After reviewing over 1,000 charts, I have found some good setups for the week. These were selected and should be viewed in the context of the broad Market Macro picture reviewed Friday which, heading into September Options Expiration sees a series of higher lows on the short term charts showing some promise for equities.
Elsewhere look for Gold to continue lower while crude oil consolidates building a bull flag. The US Dollar Index is also consolidating with a short term downward bias while US Treasuries are biased lower. The Shanghai Composite and Emerging Markets look to continue their consolidation with a bias lower.
Volatility looks to remain elevated but continuing the leak lower, with a possibility of a reversion to normal levels soon. This would lighten the bias lower for the equity index ETF’s (NYSE:SPY), (NYSE:IWM) and (NASDAQ:QQQ) and work toward no bias. The ETF’s themselves are showing short term consolidation with reversal signs after a plunge. But the move out of consolidation could be in either direction so a wait and see approach with an upward short term bias is my view.
Longer term, a break of consolidation to the upside would be quite bullish. The QQQ remains the strongest of the indexes with the IWM and SPY showing bigger risk to the downside. Use this information as you prepare for the coming week and trad’em well.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.