1/31/2014

If you ever wanted to buy Apple (AAPL) now is the time. Technically, Apple has the best short term bullish trading set up I have seen all year.

Apple today just bounced off the psychological $500 round number level. Actively traded stocks always find support or resistance at round numbers, because there is a lot of trading activity that occurs at round numbers.

Secondly, the $500 level is the exact price that Apple broke from in Late October, and as most chart watchers know previous resistance become support.

If Apple can hold above the $500 price today it is a very strong bullish reversal signal, and it also creates a great trading setup.

On Monday morning you can put a stop in $10 below Apple’s current price (at $490.50). If Apple holds above $500 today then I believe there is a greater than 90% chance it will go up to fill the gap to $550. That means you can risk $10.00 to make $50 or a 5 to 1 risk reward if Apple closes above $500 today (Monday).

You should take profits or put a limit order in at $550 as well, in order to achieve the 5 to 1 risk reward trade.

For aggressive traders you can buy a $500 February Apple Call Option, or mini apple call option (remember a mini option is much cheaper and gives you the right to hold 10 shares of Apple’s stock not a 100).

Either way if you buy the stock or buy a February Apple call option, the risk/reward of being long Apple here at $500, is just too good to miss.

Furthermore, Billionaire Carl Icahn just spent $500 million of his own money purchasing apple stock at or around $500 as well. Its hard to second guess a man who is averaged 27% a year for over 51 years and is worth $20 billion today.