Months ago, with Apple seemingly on its way to a major Hidden Pivot target at 144, I assumed it would be easy to divine the stock market’s ups and downs simply by following the number one bellwether stock closely. Instead, Apple has gone into a protracted move sideways, with little net change over the last two months. The broad averages have done about the same, although the gratuitous fluctuations have been more violent than Apple’s.
Putting aside the subtleties of Hidden Pivot Analysis, the conclusion that Apple is consolidating for a move to new all-time highs seems inescapable. From a purely visual perspective, it doesn’t take a rocket scientist to see that in the chart (see inset). What this implies, because of Apple’s bellwether status, is that new record highs impend for the broad averages as well. Since a blow-off move in Apple could go as high as 146.20, let’s try to leverage it by legging into some calendar spreads at the 145 strike. Start with a 0.90 bid for four June 19 145 calls. You should lower the bid by a penny for each seven-cent decline in the underlying stock below 125.21; or raise it by a penny for each seven-cent rise above 125.35. Unless otherwise noted, this order will be good for the entire week. ______ UPDATE (1:34 p.m. EDT): The very nasty bull trap on the opening bar allowed Rick’s Picks subscribers to acquire June 19 145 calls for as little as 0.88. (I’ll use the 0.90 price x 10 options reported in the chat room as our official basis.) The calls have since traded as high as 1.20 on a corresponding rally of 2.86 (!) in the stock. For now, I’ll recommend shorting an equal number of June 19 150 calls for 0.90, good-till-canceled. If AAPL instead reverses and heads lower, stop yourself out of the June 19 145 calls if they trade down to 0.75. _______ UPDATE (April 8, 10:51 a.m. EDT): This market looks like hell. I’m now recommending that you close out the AAPL June 145 calls for around 0.86-0.88 — slightly less than we paid.