Anyone who has been to the north shore of Kauai (one of the main eight Hawaiian Islands) can attest to some of the most beautiful natural scenery in the world - a paradise worth seeing. However, the Napali Coast area of the North Shore also has some breathtaking cliffs that dramatically rise 4000 feet from the surf that, though beautiful, look very dangerous.I digress from my Travel Channel plug to relate this story to the technical situation that AAPL finds itself in. The daily chart shows a gap from $146-$140 that occurred on January 22nd during the sell off. Today, we almost closed that gap (today's high was $145.74), a move that is very bullish for AAPL's future technically.
It is why I have stubbornly held onto my AAPL calls, even after they have more than doubled, and why I have sold no AAPL stock from my core position after it is up more than 16%. That gap has been like a magnet and filling this gap is what traders have been looking for.
However, Oracle's earnings this evening may stop this from happening tomorrow. Failure to close the gap (it doesn't HAVE to happen tomorrow) often leads to a negative island reversal, something that I don't think will happen, but we all should be aware of.
Once the gap is closed, a stock may often rest here before another leg up. This rest may provide me the opportunity to roll over my calls towards out-of-money strikes on weakness. What I see in that daily chart is a nice rounded bottom, something most of us can be very happy about.
If we see an island reversal, holding calls will be very expensive. The rest of the week should tell us a lot about AAPL. As for the general market, the "back and fill" work that I predicted is happening, but the volume is pretty low and the trend is still in favor of the bulls. A consolidation here is healthy with 1390 on the S&P a major goal.
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