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I don’t know what all the bother is about a new Apple Car.  Richard Scarry created this apple car in the 1970’s in Busy Town, and it could fly like a helicopter as well!  So when Apple ($AAPL) announces their earnings tonight and gives an update I do not expect to be wowed by a new car.  

I am also not being wowed by the stock price heading into the report.  The chart below shows that since April 2015 it has been making lower highs against support at about 92.  This is about a 50% retracement of the run higher that started in 2013.  This descending triangle has technicians looking for a $40 move when it eventually breaks, either to the downside or the upside.  And history suggests that at about 70% of the way into the apex of the triangle, the price is in the power zone, where the strongest moves occur.

In the short term it has bounced lower off of a touch at 100 twice in the last two months, making for a short term sideways channel.  You can see the 200 day SMA above and following it back notice that it has acted as resistance on the last two touches.  The momentum indicators are showing a positive divergence with the sideways price action.  

There is a gap to fill above 100 at 103.75 and possible resistance above that at 108.  Support lower may come at 95.50 or 91.80 followed by 89.50.  Short interest is low in the stock at only 1%.  in summary, the chart suggest short term support and sideways motion continues in the longer term tightening triangle as it waits for a catalyst.

Options this week suggest that the stock will $4 by Friday or 4.1%.  This less than the 4.8% it has moved after the last 6 earnings reports.  Open interest this week is biggest on the Put side at the 95 strike then sizable at 93 below ad 96  and 97 through 97.5 above.  On the Call side it is biggest at 100 and then sizable from 97.5 to 99 below and 101 to 105 above.  Implied Volatility at 55% is more than double the long run at just over 22%.  

Apple, $AAPL

Trade Idea 1:  For the long holder, it seems appropriate at this stage to protect against a move to 92 or below.  Using the July 29 Expiry 97/92 Put Spread ($1.60) for the protection can do this.  Selling the August 100 Calls ($1.10) can cut your cost by two thirds and still leave 3% upside before you need to adjust the trade.

Trade Idea 2:  For the speculator, the shot term set up looks to be to the down side.  Buying a July 29 Expiry 97/94.5/92 Put Butterfly (44 cents) gives a maximum profit of $2.06 on a close at 94.5 at expiry Friday, just below the very large open interest at 95.

Trade Idea 3:  If you believe there will be a big surprise that lifts the stock one way to position for that is to consider a July 29 Expiry/August 100 Call Calendar (37 cents) and then sell the July 29 Expiry 92 Put (43 cents) for a trade that requires no capital outlay, only margin usage, and gives downside protect to the bottom of the triangle.

Dragonfly Capital Mid Summer Sale Continues. You can now get 20% off of the first year! That is only $499 for the first year! Then renewals at 10% off going forward. These types of trades are discussed with premium members and offered as part of the premium product every day. Don’t miss out. Sign up here.