Apple Has a Bullish Setup Investors Should Be Thankful For
As we head into a likely quiet session before officially kicking off the holiday season, I’m looking forward to a short break. A quick trip to see the family in Austin won’t afford me much time to sit and relax, but a few days away from the market will be a welcome reprieve. After the barrage of election headlines, we could all benefit from a bit of downtime.
Speaking of downtime, expect the last wave of tax-loss selling to kick in next week after traders wake up from a turkey-induced nap.
One name I don’t see traders selling is Apple (AAPL) . The shares have broken free from slight disappointment around its new product announcements and sit a few dollars below highs.
Examining the weekly chart, a close above $237.50 during this holiday-interrupted trading week sets Apple bulls up well heading into the end of the year.
The stock has formed a broad ascending triangle pattern. This bullish setup has been using the 21-week exponential moving average (EMA) as supported during pullbacks, with the 5-week EMA acting as more of a midline for trading.
One could argue that the most recent dip and rally have created a cup pattern. A breakout above $237.50 would indicate an upside target of $255. Buyers of the stock on a breakout should consider a stop around $225.
Traders might also consider using a simple vertical call spread here, buying a $230 or $235 call and selling the $255 or $260 call against it. I prefer using a January 17 expiration, but traders should consider their risk tolerance, time frame, and targeted returns for a trade in Apple.
Momentum has been bouncing around in the Mag 7 names, so I understand traders who don’t want to cap their upside potential. It’s very possible Apple grabs that Mag 7 momentum and runs higher than $255, but I’ll leave that up to you to decide.
I hope everyone has a joyous and peaceful Thanksgiving holiday.
At the time of publication, Byrne had no positions in any securities mentioned.