AAPLTalk, Night Owl Update (8/12/13 Market Close): Will the Bulls Keep Running?

Now, being students of “The Parable of Lucy and the Football”, those of us who believe in the strangely consistent power of option pinning (be it pain range, max pain, what have you) aren’t expecting AAPL to easily overcome that mountain of call open interest at 470 on Friday.

But keeping things in perspective, AAPL hanging around 470 wouldn’t be a bad problem to have by the end of the week. After all, last Friday left AAPL bulls (such as myself) wondering if the descending channel/bull flag hypothesis remained halfway viable, as AAPL spent four consecutive down days retreating from its trend high of almost 472. As you know, Monday was quite a different story:

aapl-15min-081213close

What a difference a day (or a favorable Int’l Trade Commission ruling, or an essentially confirmed iPhone media event date for Sep. 10) makes! AAPL didn’t bounce off the lower trendline in the descending channel, it gapped up at the open and broke out of the channel altogether in less than 15 minutes! After a controlled, relentless move for a few more hours, AAPL cooled off somewhat and put in what could be a really nice looking bull flag formation. Oh, and it crossed over a bunch of levels and the div-adjusted 200-day moving average too.

It gets better. AAPL vaulted back into the upper range of the ascending price channel and traded very well through the 462-466 action area, settling for a very solid 467 close (about $1 off the intraday high).

aapl-hourly-081213close

Monday trading restored AAPL’s bullish composure and may have bears feeling more defensive than they’ve been in a while – notice how AAPL didn’t fall below 454, which is more than can be said for the previous two countertrends.

aapl-daily-081213close

While AAPL did have a fantastic day of impressive relative strength, there’s still work to be done for AAPL bulls to get to 485 and take another shot at trading into the earnings gap to 514. The first step – whether it’s tomorrow or in the next few days – is for AAPL to close above 470, the March 25 intraday high. The non-div-adjusted SMA-200, the final moving average for AAPL to break above, will likely be at or below 470 by Friday. It’s helpful that AAPL is acting much better around this price zone now than back then (see circled areas). After that, there’s the 475-485 action area, where AAPL last visited back in early/mid February. AAPL certainly has room to consolidate and still seem OK trend-wise, but with AAPL more bullish than it’s been in months, I happen to think AAPL would be better served holding above 462-465, and preferably above 465 (which proved troublesome resistance for AAPL on May 7-8 this year).

It’s true that when div-adjusting, AAPL is essentially at 470 already, and in any case trading over the div-adjusted SMA-200; but since WS is loath to give AAPL much benefit of the doubt, AAPL bulls have that much better of an upside argument if AAPL hurdles these higher bars.

See you on the trading floor later today.

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