בס״ד

Chocolate Salad, Please… With a Side of Lamb (AAPL,SBAC,QQQ)

Posted on September 9, 2019

The whole side.

And make sure the chocolate’s parve.

Welcome aboard everyone!

Even those not from Tennessee.

It’s game On, friends.

Our short-term market timing model looks ready to pop bullish, and it’s for that reason we’re leaning toward an old reliable for today’s trade – Apple Inc. (NASADQ:AAPL).

Should the market not move higher – for whatever reason – we’ll have the weight and secular sanctity of the financial universe’s largest stock on our side.

But if she do…

But before we get to the trade, we have one initiative to shut down.

It was launched just a week ago, in a letter called Profiting From Cell Tower Erections.  There, you’ll recall that we urged you to sell the SBAC March 20th 290 CALL for $9.30 and buy the QQQ March 20th 192 CALL for $9.39.  Total debit on the affair was $0.09.

The rationale behind the trade was simple – SBAC had alarm bells sounding from every cell tower across the nation, clanging that the stock was overdone and due for a pullback.

And that’s exactly what happened.

Today, the SBAC CALL trades for $10.73 and the Qubes CALL for $9.60.  Sell the former and buy back the latter, and you net $1.04 on nine cents spent.  That’s 1155% IN A WEEK (60,088% annualized for all you mathematicians).

As for today’s trade, here’s the how and the why.

First up, Apple will be discussing its new iPhone 11 on Tuesday, a potentially market moving event that could see a vicious pop in the stock.

Beyond that, though, the numbers are also good, even for a legacy tech company with a growth bent.

AAPL trades with a P/E of 18.5, offers a modest 1.4% yield, carries a Price/Book ratio of 10.1 and holds a cash hoard the size of nursing blue whale.

And while that’s encouraging, it’s from the technical side that we gather the bulk of our optimism.

Have a look at the daily chart –

Lots to discuss here, so let’s dive right in.

  1. To begin, we have three fan-lines down completed (in red). This generally testifies to the end of a bear move, and in Apple’s case, the decline from last fall’s all-time high (that purged the stock of nearly 40% of its value), now bears all the signs of having run its course.
  2. With the stock now above all her salient moving averages, and all those MAs unfurled and trending higher, price has traced out an ascending triangle pattern (in blue), with active resistance at roughly 216.

An ascending triangle is a bullish formation that requires a breakout higher on good volume to be confirmed.

And it’s our opinion that Tuesday’s news announcement will deliver that breakout.

  1. RSI and MACD show no signs of overheating, meaning any upside at this point would not be limited.

The downside, as we see it, is limited to the 195 area, where the moving averages are bunched.

And it’s with all this in mind that we encourage you to consider the possibility of a market moving break for AAPL as early as tomorrow.

A Jew and His Money recommends you consider selling the AAPL September 18th (2020) 170 PUT for $7.50 and buying the September 18th 2020 260 CALL for $7.75.  Total debit on the affair is $0.25.

With kind regards,

Hugh L. O’Haynew

 

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