Active-Trader - All eyes on AAPL

Welcome back, Active Traders.

Last week's post AAPL New Highs 2014 marked a new all-time high in AAPL shares and was followed-up this past week by even more highs and the graphic on the left announcing a big product launch in early September.  Speculation is rampant that Apple will announce the iWatch or the long awaited iPhone 6 to challenge the competitor Samsung Galaxy s5.

First of all, you have to admire Apple's timing.  Not only are they waiting until the end of the summer vacation season, they are waiting until the first full week of September where everyone is back from vacation. Also, they are waiting for a Tuesday when everyone is recovered from the weekend and fully ready to start ramping up for the 4th quarter which is typically strongest for AAPL shares and the entire retail selling season.

As trend followers, its our job to pay attention to the obvious clues regarding price action, and it doesn't get much more obvious that we are expecting a run-up in AAPL shares ahead of this announcement.  How high to we expect APPL to go?  To get our answer, we turn to the voodoo lines as shown on the right.

Our first target is the upper snow line at 103.09 which is just a chip-shot from Friday's close at 102.5 and will likely open at or above that level by the open on Tuesday.  Beyond that, we have the 432% fire line above at $106.52.  That represents the upper-most fire line in the fib series and beyond that we have nothing more to rely upon technically except for round numbers (such as the $110 price level) and Fibonacci retracements of prior swing lows.

Based on that, I think its highly likely that we will see $106.5 before this move is over and it should be played with the weekly (expiring 9/12/2014) options to including action up to and including the announcement.

The $106.5 price level is a mere 4% higher that the current price level of the stock which is not much of a stretch for most stocks.  But keep in mind that AAPL is the single highest capitalized stock in the US market with a stunning 612 Billion in Market Cap.  That 4 point move represents 23.6 Billion in Market Cap which greater than the GDP of most African countries and is no small move. So expect AAPL to drag the entire market higher, but don't expect moves to be fast and furious.

As for how I am playing it, I am long the shares in both my regular and retirement E*Trade accounts and long the October Monthly calls in my Tradestation account.  The October 90 calls can be purchased for less than 50 cents premium above the price of the shares.  For example, you should be able to buy the October 90 calls for under $13 per contract.  That means you get a $102.5 dollar stock for $13 a share.  Don't load up the boat, but get long here for a run up into the announcement.  It doesn't get much more obvious that this traders.

Have a great week ahead and come back next weekend for the start of my new series on the TTM Squeeze indicator.