Options traders are betting on more upside for the shares
The shares of Apple Inc. (NASDAQ:AAPL) are higher yet again today, with help from a price-target boost to $225 from $215 at Wedbush. The stock is now pacing for a 10th consecutive day in the black, and its second straight close above $200 -- a feat not accomplished since November. The last time the FAANG stock closed lower was on March 26 -- a day after Apple's highly anticipated streaming event -- and the last time it enjoyed such a lengthy win streak was in 2010. Below, we take a look at how AAPL shares tend to perform after similar rallies, and how options traders are speculating on the iPhone maker.
Specifically, there have been just five 10-day win streaks in Apple's lifetime, the last occurring in October 2010, per data from Schaeffer's Senior Quantitative Analyst Rocky White. Prior to that, you'd have to go back to February 2005 for a streak. However, during the current rally, AAPL has added roughly 7.53% -- much less than during similar 10-day surges. The biggest surge came in 2003, when the shares rocketed more than 37% in the span of two weeks.
It's not too surprising to find that 10-day rallies typically precede a bout of weakness for AAPL, as the stock tends to move into overbought territory during these streaks. The FAANG stock has extended its win streak to eleven sessions just once, and has averaged a next-day loss of 1.3%. In fact, after previous 10-day win streaks, Apple shares averaged negative returns at the one-week, one-month, and three-month checkpoints. That's compared to average anytime gains for the blue chip, looking at data since 1989.
AAPL is, in fact, in overbought territory. As of last night, the equity sported a 14-day Relative Strength Index (RSI) of 76. The shares are on pace to end at their highest point since a Nov. 12 bear gap, and are trading above a 61.8% Fibonacci retracement of their decline from the record Oct. 3 closing high to their Jan. 3 low. At last check, Apple stock was up 1.1% at $202.32.
Amid the stock's rally, options buyers have been upping the bullish ante. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 1.84 is in the 64th percentile of its annual range, reflecting a healthier-than-usual appetite for long calls over puts of late.
That trend is continuing in today's trading. So far, AAPL has seen about 269,000 calls change hands -- roughly two times the average intraday pace -- compared to just over 150,000 puts. The now at-the-money weekly 4/12 202.50-strike call is most popular, with more than 33,000 contracts exchanged. Buyers of the calls expect AAPL to extend its upward momentum -- and go against history -- and move well north of $202.50 before Friday's close, when the weekly options expire.