Apple shares recovered some of their old mojo with last week’s 10% rally, lending buoyancy to a market that was already pumped full of helium for Wall Street’s traditional observance of the Thanksgiving holiday. Nearly all of the stock’s gains came on a gap-up opening last Monday, but it is important to note that AAPL held onto those gains, consolidating over several days for, presumably, yet another burst in the week ahead. Our immediate target is 580.92, which would represent a gain of $10 over Friday’s closing price. However, if buyers are able to push even slightly past that price target, they’d become an odds-on bet to continue to the next, at least, at 607.25. Both numbers are derived from our proprietary method, Hidden Pivot Analysis, and they leave us somewhat upbeat about the holiday shopping season. Although we’re not expecting any sales records to be broken, business should be upbeat if Apple and a couple of other retail bellwethers merely maintain the status quo.
One of those bellwethers is Fedex, a stock we watch closely for clues about the actual state of the economy. Five weeks ago, FDX’s charts looked so strong that we inferred that the U.S. would finish the year on a strong upswing. However, in the weeks since, FDX has receded somewhat, suggesting that business will continue at a moderate pace, at least through December.
Bullish on Facebook
In the meantime, we hold bullish tracking positions in Google (just exited) and Facebook. The former was initiated on a purely technical signal — a “Hidden Pivot” correction target that worked very precisely. In Facebook, the recommendation was based not on technical factors alone, but also on a gut feeling that the company has finally come up with a great new way to make money. We had been looking for the stock to plunge below $14 when we read about a new Facebook service that will allow one to send not only the usual, perfunctory birthday/anniversary greetings to friends and family, but an inexpensive gift such as chocolates or flowers. Retailers are going to flock to this one-click feature, and it therefore seems likely to produce solid revenues for Facebook even in hard times.
Accordingly, when the stock turned weak recently, we told subscribers to buy a dozen March 30 calls for 0.50, and a dozen more for 0.25 as Facebook fell further still. Subsequently, when FB shares staged a powerful rally last week, we recommended shorting March 33 calls against our March 30s for 0.50. This was easily accomplished on Friday, leaving us with a vertical bull spread that has the potential to produce a gain of as much as $7,500 on an initial, unmargined outlay of just $900. The kicker is that there is no loss possible; for even if the stock were to fall to zero, the spread would yield a profit of $300 – nearly enough to pay for a year’s subscription to Rick’s Picks. That was the intention of the recommendation, incidentally – to give even inexperienced traders a chance to recoup the cost of a subscription. (Click here to see for yourself if you could have followed our simple instructions for legging into a virtually riskless “vertical” call spread. Your free trial subscription will also allow you to receive real-time e-mails notifications of similar opportunities if they should arrive.)