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Trading Apple Inc. with identifying key levels (NASDAQ: AAPL)

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How do we trade Apple Stock?

Basically what we do is a simple market analysis and some drawing on the charts which help us to define entry levels for buying call or put options.

To make constant profits by trading Apple you would need stable broker, daily market analysis and the ability to read charts.

The company’s huge success during the last few years is based on wide patent portfolio which gives Apple a competitive advantage on three major markets: personal computers, mobile devices, music devices and services. Innovations are the key factors which move Apple forward and keep them in a niche premium market with significant customer loyalty.

Apple Inc. Market Analysis

We are taking a close look on the quarter earning releases which are published in January, April, July and October. It is very important to know how Apple performs on the major markets so that we have an idea about the big picture and what to expect.

First Quarter Earnings (27 January 2014)

The company announced a record quarterly revenue of $57.6 billion (Fiscal 2014 first quarter) and quarterly net profit of $13.1 billion, or $14.50 per diluted share compared to $13.81 same time previous year.

During the first quarter the company sold 51 million iPhones compared to 47.8 million in the year-ago quarter and 26 million iPads compared to 22.9 million in the year-ago quarter. Apple’s Board of Directors has declared a cash dividend of $3.05 per share of the Company’s common stock.

The charts also confirm the positive run of the company. Apple’s stock price closed in March 2014 on $523 per share compared to $443 in March 2013.

Reading latest company news

By analyzing the news coming from Apple we have an idea if this positive trend will continue or it will reverse its trends. News such as for example cooperation with other company, development of a new technology, release of a new product, software updates, new patent or lawsuit against competitive company are of a very high importance for us.

Such news can make traders sell or buy Apple Inc. shares and our task is to predict the market price.

How we trade Apple Inc. in real market situations?

Apple trading on 2nd Jan 2014

At this time Apple had entered a consolidation phase with prices dropping about 1.5% and we were looking for a break lower to buy daily puts or if the price had stayed above $552 - daily calls.

apple chart 02 January 2014

You can see on the chart the break lower didn’t take place that day but at 19:00 GMT we found an entry point at 552.03 level to buy daily call options. The price closed at the end of the day at 553.20 which was a successful trade.

Apple trading on 30th Jan 2014

This is an example how we traded Apple some days after the earnings report on 27th of Jan 2014. The quarter showed some very positive numbers, however traders have started to question the company’s ability to innovate mainly because of the iPhone 5C failure.

apple chart 30 January 2014

We saw on the chart that share prices dropped dramatically ($550 to $518) after the market closed on Monday 27th of Jan 2014. The company hadn’t traded in the $400’s in the previous three months so we suggested any drop below $500 would trigger some stops.

In this case our strategy was clear – if we had seen hourly close below $500 we were buying daily puts.

As you see on the chart from 30th of January, at 13:00 GMT the price has opened on levels of 500.83 and closed 499.30 an hour later so we have been ready to buy a daily put option. At 14:00 GMT the price opened 499.49 and we bought put option with daily expiry. At the end of the day the price closed 499.27 and our trade was in the money.

Apple Inc. Technical analysis

We will now look at the chart. It is an integral part of every trading strategy to identify key levels of support and resistance which could establish a solid base on our opinions, when important levels are broken we can trade on a directional basis assuming that the news that we hear about the company coincide with the charts.

So it is not about blindly following the chart and identifying levels, but putting them in context with the information about the company that we have or are likely to get.

Apple Inc. Chart 17th April 2014

apple chart 17 April 2014

We have a declining trend line from $549 through $543 which serves as an identifier as to when will the price manage to continue on an upward trajectory - it is currently between $530 and $532 which will serve as key levels, especially in the context of the recent rebound high marked at $532.23.

On the other hand we are expecting support from the previous support line at $523 and the low marked last week just below $512.

In order to practice such strategy you would need at the same time to have some good financial knowledge and to follow the upcoming news from Apple.