Apple, Inc AAPL is set to print its second-quarter financial results after the market close on Thursday. The stock was trading over 4% higher heading into the event
When the tech giant printed its first-quarter results in January the stock plunged over 6.14% over the four trading days that followed, to reach a high of $175.88. Apple has since see-sawed between about the $150 and $180 levels amid increased market volatility.
For the first quarter, Apple reported an adjusted EPS of $1.68 on revenue of $28.76 billion, which beat the consensus estimate of $1.24 per share on revenues of $22.24 billion. For the second quarter, analysts estimate that Apple will report earnings per share of $1.43.
From a technical analysis perspective, Apple’s stock looks set for a big reversal to the upside but it should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.
Options traders particularly, those who are holding close dated calls or puts, take on extra risk because the intuitions writing the options increase premiums to account for implied volatility. The implied move for options of Apple expiring this week is 5.56%.
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The Apple Chart: On Thursday, Apple broke up bullishly from a falling channel pattern on the daily chart, which had been holding the stock down since April 4. The break up from the upper descending trendline of the channel was on higher-than-average volume, which indicates the pattern was recognized.
- Apple is still trading in a downtrend on this timeframe, making a series of lower highs and lower lows. The most recent lower high was printed on April 21 at $171.53 and the most recent lower low was formed at the $155.38 mark on Wednesday. In order for a trend change to the upside to confirm, Apple will eventually need to print a lower high above the most recent low.
- On Thursday, Apple tested the 200-day simple moving average (SMA) as support and bounced up from the area. The 200-day SMA is a bellwether indicator that traders and investors use to determine whether a security is in a bull or bear market. On Tuesday and Wednesday, when the stock closed the trading sessions below the 200-day SMA, a bear trap was created.
- If Apple closes the trading session near its high-of-day, the stock will print a bullish Marubozu candlestick, which could indicate higher prices are on the way for Friday. If the stock closes the session with a long upper wick, it could indicate the next lower high has been printed and Apple will trade lower on Friday.
- Apple has resistance above at $167.88 and $171.03 and support below at $162.14 and $157.26.