Apple (AAPL): Earnings in Focus

The first week of earnings is kicking off with a bang. CPI data has come in lower than expected, the Nasdaq is breaking out, and most mega-cap tech names continue moving higher into their respective earnings reports. But there is one that I think still has room to run.

Apple: A Run into Earnings Case

Apple historically reports earnings around the same time as Microsoft, but for some reason, it’s been a little late in the last two quarters. Microsoft is set to report earnings on July 25th, and Apple is not slated until August 3rd. Both companies are sitting just below their previous all-time highs, with Apple trading at $190.82 with a previous high at $194.48 and Microsoft trading at $342.12 with a previous high of $351.47. This isn’t the only factor, but when you have such strong companies trading just below their previous highs right around earnings, those previous highs become like magnets in a bull market.

Apple has been challenging to buy due to its lack of pullbacks since its breakaway gap post-earnings last quarter. Apple has been holding its 8 EMA on the daily chart very tightly. But this week, it finally pulled back to the 21 EMA – a much better buying spot with an edge. Of course, it already bounced. But, on that pullback, it consolidated into a squeeze on the 194-minute chart. This, plus multiple other factors, gives me a bullish buy setup for a short-term trade on the run into earnings in Apple.

Five Star Factors

When you are looking at a trade setup, you should always try to find five items of confluence that give you reasons to believe a trade has an edge. This is because only having 1-3 reasons doesn’t make your trade setup very strong, and you lack an edge with high probability. Can you have a trade setup with five good reasons and have the trade still fail? Of course, it happens sometimes, but the idea is that you can select only the strongest ones by having more support behind your ideas.

Apple’s Five Star Factors:

  • Hot Zone Stats: Apple historically trades higher by about 4.38% in the pre-earnings 21 bar timeframe, and it’s currently right in the Hot Zone
  • Apple had a breakaway gap last quarter post-earnings
  • Apple is in a bullish trend and pulled back into the 21 EMA and bounced
  • Apple has Fibonacci extension targets at $200, which overlap perfectly with the market maker’s expected move of $10 going into earnings and my IV percentile targets.
  • Since it’s reporting after most other mega-cap tech stocks, there is the possibility that they report well and add extra fuel to Apple’s fire.
  • Apple is a mega-cap technology stock that historically rallies during the pre-earnings time frame in a bull market.

Can you think of any that I am missing?

Check out the patterns in the Hot Zone below:


Trading Apple

So, am I trading Apple? Definitely. Apple is one of the most significant stock holdings in my long-term account, but I am also trading it here. Options include long calls in the earnings series, bullish butterflies, put credit spreads, and more. Remember that using multi-leg options spreads in an earnings series is generally not a good idea because the rise in IV works against your ideas in a lot of cases. Therefore, I generally buy premium in the earnings series and sell premium in the series around earnings for the Run into Earnings, but sell premium over the earnings report for earnings trades only.

Are you trading Apple? Let me know on Twitter.






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