The Apple (AAPL) Earnings Trade

Let’s review the Apple (AAPL) earnings trade set-up that I have been anticipating. Take a quick moment to refresh you memory with the details of the trade-setup in this article.

12/10/2016 – Apple’s (AAPL) New Uptrend

In this previous article for Apple (AAPL), I was monitoring the share price for a trading opportunity I noticed setting up around the $122 area. I also discussed support levels in the above article for anyone that was not in Apple but was looking to purchase some shares.

Anyone that made scale-in purchases based on my recommendations in that article is currently sitting on a 5-10% gain in AAPL’s share price.

The $122 trade set-up appears to be progressing, albeit a little slower than I had hoped. And because of this slowness, it is creating a decision for investors to make before its next earnings report. Apple’s next earnings report is scheduled for January 31, 2017 after the market close. Let’s dig into the charts.

AAPL – Moving Averages & Elliott Waves

This fist chart is a 1 year daily candlestick chart for Apple (AAPL). The analysis is from a moving average perspective. I also overlaid a Fibonacci Extension Tool on the chart and then identified what I believe is Bullish Impulse wave pattern that is under development. This Bullish Impulse wave pattern is how I anticipate Apple (AAPL) reaches its $122 target price for the trade.

Analyzing Apple’s (AAPL) Moving Averages Supplemented by Elliott Wave Analysis

The Golden Ratio for the Fibonacci Extension Tool (the 161.8% Target Line) sits at $121.74, right below my $122 trading target price. I was hoping AAPL’s share price reached my $122 price target by this time already, which would have made for an easier trade set-up. But as we know with the market, nothing ever comes easy.

If AAPL could have already reached the $122 price target by now, it would have given AAPL’s share price time to consolidate before its next earnings report. Instead, its share price appears poised to reach the $122 area in the next week or so. That would most likely not be enough time to consolidate the Bullish Impulse wave pattern that has yet to complete and then start a new Bullish Impulse wave pattern.

Let’s get back to the moving averages for a second. After a new uptrend starts, the first pullback below the 20 Day moving average is normally a good time to make a scale-in purchase. That opportunity could come after AAPL reaches its $122 price target and starts to consolidate its Bullish Impulse wave pattern before its January 31 earnings report.

AAPL – Trendlines & Candlesticks

This next chart is a 2 year daily candlestick chart. I wanted to capture some previous support and resistance areas on the chart, so I needed to expand it out further. I also moved the Fibonacci Extension Tool back to the very bottom of AAPL’s uptrend. The 261.8% Target Line for the Fibonacci Extension Tool gives a price target of $124.01, slightly higher than my $122 price target. The 261.8% Target Line also sits right below a strong resistance area.

Monitoring Support & Resistance Areas From Trendlines and Candlestick Patterns

Based on the above analysis, AAPL could even push past the $122 price target. However, pushing any higher than the $124.01 price target is going to require a great deal of buying volume. AAPL’s share price has some pretty stiff resistance above the $124.01 area. This stiff resistance was created by a Bearish Engulfing candlestick pattern, which is also part of a Falling Window candlestick pattern. A double whammy of resistance.

Most stocks do not move up and through such a bearish resistance area so easy. That is why the first time AAPL’s share price reaches the $124.01 area, it most likely represents a higher probability trading opportunity to sell shares and then repurchase those shares back at lower prices. Lower prices is defined as the $112 area. The $112 area is a previous resistance area from another Bearish Engulfing candlestick pattern. AAPL’s share price has moved above, below and now back above that resistance area. However, the most recent breakout from the resistance will, more likely than not, need a re-test.

Apple (AAPL) – Summary

The Apple (AAPL) earnings trade continues to progress. My shares and my mom’s shares will both be participating in this trade. If Apple (AAPL) reaches the $124.01 price target before its next earnings report, I will be selling 1/2 of my shares at that level. If the $124.01 stiff overhead resistance area is not reached before earnings though, I will continue holding all my shares through the earnings announcement.

Maybe it takes the earnings call to reach the 261.8% Target Line and the $124.01 area, maybe it doesn’t. Either way, when AAPL’s share price does start reaching these overhead resistance areas, whether its before or after earnings, it is probably a good time to lock in some current gains and watch for a correction or pullback to repurchase those shares. The repurchase zone, as of now, would be around the $112 area. That is where I will be looking to repurchase any shares I sell.

Any shares repurchased at the $112 area should then be held onto until AAPL’s share price moves back towards the overhead resistance again. Re-analysis of the charts would be needed at that point, but this should help to provide a trading strategy leading into earnings for AAPL.

If you are still waiting to go long on AAPL shares, waiting for a pullback at this point is your best option. The first break back below the 20 Day moving average would be your least risky opportunity at this point. Look for that break to find support back at the $112 level, right around where the 50 Day moving average currently resides.

Good luck trading.