Medium term
Trade view / 04 August 2016 at 10:37 GMT

UPDATE: Apple's post-earnings rally

Trader /
United States

Shares of Apple have rallied since the company's latest earnings announcement on July 26. Technically the post-earnings rally looks increasingly promising for the stock through a multi-week/month lens, so I wanted to update on my analysis and trade idea from July 28.

On July 28 I shared a trade idea to buy AAPL stock upon a breakout attempt. Thus far this breakout attempt has taken place and I have legged into an initial long position in the stock. 

The bigger picture multi-year look of AAPL stock remains the same as it was in late July, i.e. the longer-term line of support is holding while the intermediate-term down-trend of lower highs also remains. 

Apple stock since 2009 (click to enlarge)
Apple Inc.
Source: eSignal

On the daily chart however AAPL has not only rallied into or marginally above diagonal resistance (depending on how exact one measures the black diagonal resistance line) but has also developed a so-called "island reversal." 

This island reversal is made up of the down-gap from April, followed by the sideways consolidation phase in the blue box, followed by the up-gap and rally on July 27th. The bullish nature of such a bullish island reversal should be quite apparent. From here, traders can still get long the stock, particularly if it can overcome Monday's highs near $106.

Apple daily chart since end of last year (click to enlarge)
Apple Inc.
Source: eSignal

Management and risk description

Two risks to this trade: 

1. AAPL stock is going ex-dividend today August 4, which is to say that there is some risk that investors have bid higher the stock in order to receive the upcoming dividend payment and that the stock thus now begins to trade sideways to lower. 

2. From a pure price action perspective note that the last two times when AAPL pierced above its red 200-day moving average it quickly reversed back lower in coming days. Thus, there still is that risk of a bearish reversal surprise. 


Entry: buy AAPL stock at $104.50 or higher.

Stop: $102.30.

Target: $110-112.

Time horizon: two to four weeks.

— Edited by Clemens Bomsdorf

Non-independent investment research disclaimer applies. Read more
04 August
Cat Cat
Thanks for the update.
04 August
Feders Feders
Hi, I made a 105/110 bull call spread expiring in 43 days with this idea. Is this time frame (43 days) ok for this trade idea, or too much?


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