Apple Share Price Powers Higher but Options Urge Caution

The Apple share price has gone parabolic in August with a break above the price channel resistance and the stock now trades above $500.

The rebound in stocks from the coronavirus panic-selling in March has been impressive, but alarm bells are ringing about the sustainability of the bullish move. One such signal is in the options market, where the ratio of puts to calls in Apple shares is at a 15 year low. Apple’s market cap rose by nearly $250bn in just a few days, ahead of the upcoming stock split, as retail investors flooded into long options positions, rather than the stock itself. This is a risky strategy and highlights that traders believe this is a one-way bet. Analysts are highlighting concerns that stock index valuations are largely being driven by a handful of stocks.

Apple’s market cap is now over $2 trillion after the market bought into tech stocks for their resilience to the economic problems caused by the virus.

In its third-quarter earnings release on the 30th July, the company announced revenues up 11% and earnings per share (EPS) up 18% to new June quarter records. Apple was always reliant on product sales, but their services division has seen steady growth, particularly during the virus lockdowns, where demand for new apps and services increased.

The company announced a dividend of $0.82 per share and the board also approved a 4:1 stock split to make the stock more accessible to smaller investors and the revised stock valuation will begin trading on 31st August.

Apple Technical Outlook

The Apple share price closed lower on Monday but has since mounted a rebound and the Monday high near $510 is obvious resistance with no prices above to predict a potential high. The problem for Apple traders is the downside risk. There is no support to the $460 level, which is also the top of the price channel. Traders should be cautious about long positions and be ready to cut losses under $500. The Investing Cube trading course can provide further advice on risk management of positions. 

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Apple Daily Chart

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