Apple (AAPL) - Get Report reported fiscal first-quarter results on Tuesday. Since then, shares of the technology giant have fallen, first forming a doji pattern on the chart and then a big downward gap. Now what? The chart reveals several bullish reversal signals, so the stock likely will move higher soon.
Apple's stock price has been below support since late December. During this time, the market has been bearish and negative, but Apple looks poised for a bullish reversal.
Two bullish candlestick signals appeared in recent days, a meeting lines signal and a harami cross. Seeing two reversals in close proximity strengthens the signal. But there is more. On Wednesday a large volume spike developed, the largest spike on the chart. Lastly, momentum, as measured by the relative strength index, moved sharply lower and finished close to being oversold.
Taken together, these signals point to a bullish reversal in the near future. With this in mind, we looked at the possibility of purchasing call options. The Feb. 5 weekly contracts expire in a bit more than a week, and the 93.50 call option is priced well, with an ask price of 1.82. After trading costs, this option this can be purchased for $191. A 2-point move in the stock takes this to break-even once time value evaporates next week, but chances are good for this call to become profitable very quickly.
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This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.
Besides blogging atTheStreet.com,Michael Thomsett alsoblogs at theSeeking Alpha and several other sites. He is author of 12 options books including Making Money with Option Strategies (Career Press, 2016) and has been trading options for 35 years. Thomsett Publishing Website