Apple Stock Melts Up In Blue Skies: What's Next?

Apple Inc AAPL made a new all-time high on Tuesday morning. The stock broke up and went on a blue sky run from an ascending triangle Benzinga called out on Aug. 16.

There was a massive amount of bullish options flow to power the rally with dozens of call contracts purchased and very few puts. One trader purchased 410 call contracts at $5 per piece with a strike of $155 and an Oct. 15 expiry. The trader paid a total of $205,000 for the order, which is already in-the-money. This means the trader will have the ability to convert the calls to shares at $155 before October even if Apple’s stock trades higher over the coming days or weeks.

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The Apple Chart: Apple was melting up in blue skies on relatively low volume on Tuesday. By 11 a.m. ET about 28 million shares of the stock had traded hands compared to the average 10-day trading volume of 77.33 million. The low volume could be indicative of hesitation in the overall market with the S&P 500 trading lower.

Apple’s relative strength index (RSI) was approaching 70% on the run higher. When an RSI hits or exceeds 70% it puts the stock into overbought territory, which is a sell signal for technical traders. When Apple’s RSI hit 70% on Aug. 16, the stock consolidated down over 4% in the three trading days that followed to drop the RSI down to a more comfortable 52%.

Apple is trading above the eight-day and 21-day exponential moving averages (EMAs) with the eight-day EMA trending above the 21-day, both of which are bullish indicators for the short term. The stock is also trading about 17% above the 200-day simple moving average which indicates overall sentiment in the stock is bullish.

• Bulls want to see big bullish volume come in to drive Apple’s stock higher on Wednesday or for a period of consolidation to begin to lower the stocks RSI. Apple has no resistance above in the form of price history above Tuesday’s high of day at $156.24.
• Bears want to see big bearish volume enter Apple’s stock to drop it below support of the eight-day EMA. If Apple loses the level as support, it could fall toward a lower support level at $150.