This Apple (AAPL) Trade Targets a 100% Return in 9 Weeks

We saw another big reversal on Thursday, only this time it was an afternoon rally instead of an afternoon selloff. All four of the main indices were lower in the morning and all four finished with significant gains. The Nasdaq led the way with a gain of 1.72% and it was followed by the Russell with a gain of 1.32%. The S&P notched a gain of 106% and the Dow registered the smallest gain at 0.83%.

Even though it was pretty broad rally, only seven of the 10 sectors posted gains. The tech sector led the way with a gain of 2.51%. There were four other sectors that posted gains over one percent.

The three sectors that lost ground were utilities (-0.81%), consumer staples (-0.21%), and consumer discretionary (0.14%).

Utilities and staples kind of make sense since it was a risk-on day, but discretionary being in the red was a little odd.

My scans turned decidedly more bullish last night after the rally.

There were 74 names on the bullish list compared to only nine on the bearish list.

The barometer jumped sharply from -42.4 to +11.4.

That is the first positive reading since November 2.

The bullish list was quite impressive last night with a number of stocks that had EPS ratings over 80 and A SMR ratings. The one in particular that caught my eye was Apple (Nasdaq: AAPL). The company has an EPS rating of 90 and an A SMR rating.

Apple has gotten a lot of press over the last few weeks and has been blamed in part for the fall in the overall market and other stocks affiliated with the company as suppliers and such. What jumped out to me was the weekly chart and how the stock touched a trendline that connects the lows from earlier this year. That trendline is just below the 52-week moving average and just above the $180 level which served as a temporary high in March.

Buy to open the January 2019 $185-strike calls on AAPL at $13.65 or better. These options expire on January 18. For these options to double, the stock will need to reach $212.30. That may seem like a far-fetched target, but it is only 11% above yesterday’s closing price. I suggest a target gain of 100% with a stop at $185.

— Rick Pendergraft

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Rick Pendergraft, Trades Of The Day

Rick Pendergraft has been studying, trading, analyzing and writing about the investment markets for over 30 years. He has worked for some of the largest financial publishers in the world and he has been quoted in the Wall Street Journal, USA Today, the New York Times and the Washington Post. In addition, he has been interviewed on Bloomberg, CNBC and Fox Business News. Rick's analysis process includes fundamental, sentiment and technical analysis.