Why it May be Time to Short Apple

04:14 02/06/2019

Sometimes, timing is everything.

On February 1, 2019, we noted that Apple AAPL  was one of the most oversold stocks that couldn’t be ignored. On a two-year chart not only was Apple oversold at its lower Bollinger Band (2,20), it became excessively oversold on RSI, MACD and Williams’ %R.

For us, that was unsustainable. And it paid to be contrarian as others ran out of fear.

So, we noted that the Apple stock, along with the AAPL March 15, 2019 170 and 175 calls were worth looking into as a buy opportunity. Here’s how each played out so far if you bought.

At the time, Apple traded at just $167 a share. It’s now up to $174.13. The AAPL March 15, 2019 170 calls traded at $4.05. It’s now up to $7.15.

The AAPL March 175 calls traded at $2. It’s now up to $4.35.

The smart move here would be to take those wins… and here’s why.

The same indicators that told us to buy – Bollinger Bands, W%R and RSI – are now telling us it’s time to sell the stock on an over-extension.

As you can see in the chart below, Apple is now over-extended above its upper Bollinger Band. RSI is now nearing its 70-line. And Williams’ %R is above its 20-line. As each agrees with one another, it’s a sign that Apple may begin to pull back and revert to mean, immediate-term.

Should it play out as we believe it will, we can make money by using the AAPL March 15, 2019 170 and 175 puts, which currently trade at $3.20 and $5.45, respectively, per eTrade.com.

While this system won’t produce 100% accuracy, it’s had up to an 80% win rate.

This article has been provided by a Chasing Markets contributor. All content submitted by this author represent their personal opinions, and should be considered as such for entertainment purpose only. All opinions expressed are those of the writer, and may not necessarily represent fact, opinions, or bias of Chasing Markets.
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