I See Apple Stock at $200/Share... Here's What to Do About It Today

We all know that tech giant Apple Inc. (Nasdaq: AAPL) did a seven-for-one (7:1) stock split on June 9, 2014, which took the price from about $645 a share down to $94 a share.

But what you may not know is that this move set up Apple stock for something really incredible. And I'm going to show you how to trade it.

It has to do with the stock split.

Pundits will tell you over and over again a stock split does nothing to the valuation of the amount of equity of AAPL stock in your portfolio. If you had $2,000 worth of stock before the split, you have $2,000 worth of stock after it splits (just more shares). Why all the hoopla?

Apple stock

The hoopla comes from past case studies of many a stock that has split only to regain its pre-split price within one to three years.

There is where the excitement lies: The very real possibility of doubling your money within 12 to 36 months.

Or in this case, the possibility of increasing it by seven times...

Stock Splits Can Create Opportunity

Just to illustrate, if you bought 500 shares of a stock at $50, your total amount of stock is worth $25,000. After a two-for-one (2:1) split, you now have 1,000 shares priced at $25, or the same $25,000 worth of stock.

For people who did not previously own the stock at $50, they may now see it at $25 as affordable and start acquiring a position. At least, that is what the company hopes. As they see it, more buyers of their stock is more demand, and that should create a higher share price.

In any case, if that stock goes back to $50, you now have 1,000 shares times $50, or $50,000 worth of stock. In essence, the investment in that stock has doubled!

And that brings me back to AAPL stock...

It did a 7:1 split, meaning those who owned it prior to the split now have seven times more shares of stock. Should it go back to its pre-split price, this means the opportunity is there to multiply their money by seven times!

That all sounds good, but I know many of you will now point to the current price of the stock (around $115 a share). While it is up about 22% (before dividends) since the split 14 months ago, it is still trading well below its pre-split price.

This is true, and the question now becomes, where will it go from here?

Technical Analysis Shows Us How Far AAPL Could Fall

As I write this, AAPL has fallen about 13% from the closing high ($132 a share) set in July. It is possible that AAPL goes lower.

Look at the chart below and you see a boxed-in range for the stock that shows a breakdown of the support line of that range. Technical analysis tells us a move equal to the range (the difference between support/low and resistance/high of the range) may be expected in either direction of the break.

Apple stock

Click to Enlarge

The range appears to be $14 points. With the breakdown of support, an expectation of $14 points lower could occur, taking AAPL to $106. No one wants to hear that. No one owning this wants to believe that could happen. But it could.
But even though it could, I still believe AAPL is a $200 stock in 12 months.

So what to do?

For investors, you likely wait out this potential drop in price. AAPL is still the largest market cap stock in the world at $660 billion (with a "B!").

What to do for traders? I look to Money Calendar.

The Calendar Turns Bright Green...

I start by looking at the month and try to assess whether we are in a bullish phase or bearish phase of market action based on the heat map or color coding of the days. A darker shade of green means a higher level of bullishness, where a higher shade of red speaks to a higher level of bearishness.

See below:

Calendar-August Large

Click to Enlarge

When it comes to looking at the candidates on Money Calendar, I have said in the past these price patterns have happened and proven out at a high success rate over the last 10 years, of which I tend to favor those at a 90% success rate or better.
I have also said it gives you an average price/profit move over specific date ranges that can be used to anticipate the upcoming price move on the stock. This is great because it doesn't even need additional technical analysis, per se, even though I used it above to illustrate what is happening with AAPL stock.

One thing I will give you as an added way to assess when to go with a bullish or bearish trade is to look for more bullish opportunities when the calendar shows a higher amount of bullish candidates (a darker green color on the map) or bearish opportunities (with more red).

As you can see here, starting Friday, Aug. 7, we're hitting a long, green expanse.

That being said, I will wait to pull the trigger on an AAPL trade.

I'm waiting until we actually get into a more bullish period shown by Money Calendar, and then I will go from the month view shown to the list for the specific day view of my choosing.

What day will that be? What profit run will be expected on AAPL at that time? What strategy will be utilized to try and maximize the ROI or at least get us a double?

Great questions.

Keep an eye open to upcoming articles, and you'll find out!

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About the Author

Tom Gentile, options trading specialist for Money Map Press, is widely known as America's No. 1 Pattern Trader thanks to his nearly 30 years of experience spotting lucrative patterns in options trading. Tom has taught over 300,000 traders his option trading secrets in a variety of settings, including seminars and workshops. He's also a bestselling author of eight books and training courses.

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