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Apple Stock Flashes Bull Signal After Sell-Off

The FAANG stock is bouncing in today's trading

Oct 12, 2018 at 2:29 PM
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The tech sector got hit particularly hard during the heavy selling on Wall Street this week. This recent pullback has likely created several bullish trading opportunities, too, with Apple Inc. (NASDAQ:AAPL) falling 5.5% from its Oct. 9 close of $226.87 to its Oct. 11 settlement at $214.45. The FAANG stock is bouncing back fast, though, last seen up 2.1% at $218.82, and near the top of the Dow.

During this two-day descent, AAPL stock came within one standard deviation of its 80-day moving average. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, there have been seven other times since 2015 that Apple has come so close to this trendline after trading above it for a lengthy stretch -- defined as 60% of the time over the past two months, and eight of the last 10 trading days -- and the shares went on to average a one-month gain of 3.82%.

While this may seem like a relatively modest gain, it should be noted that Apple pulled back to its 80-day trendline back in late June before embarking on a more than two-month rally that culminated it the stock's Oct. 3 record high of $233.47. What's more, this week's intraday low of $212.32 coincides with a 38.2% Fibonacci retracement of this surge.

aapl stock daily price chart on oct 12

In the options pits, short-term speculators are more put-heavy than usual, per Apple's Schaeffer's put/call open interest ratio (SOIR) of 1.13 -- in the 78th annual percentile. The October 195 put is home to peak front-month put open interest, with heavy accumulations also found at the October 170, 210, 215, and 220 puts.

While data points to a mix of buying and selling activity across all these strikes, it appears to be a more attractive time to sell premium on short-term Apple options. AAPL's 30-day at-the-money implied volatility topped out at a 52-week high of 40.4% on Wednesday, and was last seen at 34.5% -- in the 99th annual percentile. In other words, near-term options are pricing in elevated volatility expectations at the moment.


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