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When it comes to the financial press, I tend to hit the mute button… until I catch a headline about a stock or sector that's actually worth my time.
So yesterday, I turned the volume up when the pundits started talking about Apple Inc. (Nasdaq: AAPL) and the recent leaks about its upcoming smartphone, the iPhone 8.
Inevitably, the "topic du jour" is now the stock and whether its run in the market is over – or revving up to climb even higher this year.
But the numbers don't lie – and here's what they're predicting…
All Signs Point to the Bulls
Although big technology has fueled the Nasdaq to all-time highs, the so-called "FANG" stocks – Facebook Inc. (Nasdaq: FB), Amazon.com Inc. (Nasdaq: AMZN), Netflix Inc. (Nasdaq: NFLX), and Alphabet Inc. (Nasdaq: GOOGL) – haven't quite done the same. They've been ticking higher but really haven't made new highs for themselves. The one stock that's really helped the Nasdaq the most is another big tech stock: Apple.
Right now, AAPL is trading at brand-new highs, but this should really come as no surprise to you. Take a look at the stock's price pattern over the past eight months:
As you can see by the numbers, AAPL has made higher lows and higher highs. Toward the far right of the chart (which reflects the most recent price action), the stock looked like it was going to use the $118 price point as a double top, a resistance point. But it did not, and actually broke out above that price. Since then, it's been making new highs, which you can see where it's circled above in purple.
And there are two reasons why I see Apple stock climbing even higher from here:
1) The iPhone 8: Apple is anticipating the release of multiple iPhone models that will include new features, such as flexible OLED, a slightly larger screen size, and wireless charging. And the fact that details about the iPhone 8 have been leaked only propels the stock higher.
2) Trump Tax Reform: President Trump promises to lower corporate taxes and taxes on the companies' cash reserves, which could provide a significant, positive impact on AAPL's earnings.
So here's how you can profit this quarter…
Buying calls on AAPL is an option strategy that gives you the opportunity to control 100 shares of the stock for less than buying the stock outright. Typically, one options trade is cheaper than one single share of the stock. This strategy puts you in position to capture high-dollar profits.
Another strategy you could use to capitalize on AAPL's bullish movement – and reduce your cost even more – is the bullish loophole trade (bull call debit spread). This strategy involves buying-to-open a lower-strike call option while selling-to-open a higher-strike call option simultaneously on the same order ticket. Though a loophole trade offers less profit potential than buying straight call options, it reduces your cost further and increases your probability of profit.
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.