On Friday I was taken note to AAPL consolidating between 97.10
and 98.25 which allowed me to engage
in a new Strangle with a January 2017 expiration. I engaged in the Strangle
strategy due to my belief AAPL will
very likely either be well above 110.00
or well below 92.00 sometime between
now and yearend.
There is no doubt Warren Buffett making a large purchase in AAPL stock provided absolute relief for
buyers; the Buffett headline could not have come at a better time once AAPL breached the key 92.00 support. However a large purchase
of AAPL stock by one person and/or by
one investment holding company is not an overnight fix to whatever the concern
was which had AAPL below the 92.00 support in the first place. This means there is still high potential for two way macro directional price action.
The key now for buyers is to see if the Warren Buffett
headline will just be a short-lived relief rally or if the Warren Buffett
headline will actually provide the floor needed to keep sellers at bay.
For the Strangle strategy either scenario does not matter
but another reason I engage in the Strangle strategy rather than a naked Long swing position is the concern for
the overall market if the Federal Reserve does begin to gradually hike interest
rates; if so there will be potential for an overall stock market topping process
to begin before some sort of meaningful pull-back or correction which will
definitely put pressure on a stock or company that needs a second billionaire bailout following Carl Icahn’s large purchase of AAPL stock back in 2013.
AAPL is now above
the consolidation range (+98.25) but
in order to get excited about the Call side of the new Strangle engaged in on
Friday AAPL will first need to get/hold
above 100.30 and if so 101.80-102.50 zone becomes a potential
target. AAPL at 102s (if reached) will be good swing buyers but for odds to be more in favor of a macro bullish bias AAPL will need a daily close above the low
volume area (LVA) at 103s/104s.
If buyers fail to hold above 98.25 with 97.10 as line
in sand (LIS) this week or after the FOMC rate decision in June odds will begin
to favor a move to 95.50-95.30 zone
before the high volume area (HVA) at 94.25.
Once/if below 94.25 AAPL will likely
then be on its way back and below the key 92.00
support. If so the lower targets are at 82s
then 76s/75s.
Ethan Premock
Futures & Options Strategist
Hamzei Anlytics, LLC
Ethan Premock
Futures & Options Strategist
Hamzei Anlytics, LLC