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After Rousing Start To 2012, $AAPL May Stall In The Near-term

|Includes: Apple Inc. (AAPL)

Tim Biggam, TradingBlock (Feruary 14, 2012, 4:25 pm CST)

Symbol Analyst Target Price Target Date
AAPL 505.00 March 16, 2012

Apple Inc. (ticker: AAPL), together with subsidiaries, designs, manufactures, and markets mobile communication and media devices, personal computers, and portable digital music players; and sells related software, services, peripherals, networking solutions, and third-party digital content and applications worldwide.

What a run it has been. AAPL stock is now up nearly 25% YTD, with the stock also being up 8 straight days. Short-term sentiment readings are off the chart, with the 14-day RSI (relative strength index) over 87. The stock is finally starting to lose a little momentum, with 12-day ROC (price rate of change) starting to curl downward.

From a contrarian perspective, this stock is certainly over-loved short term. While I don't anticipate AAPL to fall sharply, or even fall much at all, I do look for the momentum to fade and some profit taking to ensue.

Past post-earnings run ups have usually displayed a similar pattern, moving up sharply until an area of value is found, followed by sideways treading for a few months.

I expect AAPL to follow a similar pattern now, with the stock remaining virtually unchanged around the 505 level by March expiration.

Play of the Day

Based on Apple's (ticker: AAPL) current market price of $509.49 and using a target price of $505.00, a target date of March 16, 2012 and $10,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.

Click on the strategy name below to access trade details using TradeBuilder on Powered by TradingBlock's TradeBuilder.

Strategy (click for details) % Return at Target Probability of breaking
even or better
Sell Mar Iron Condor +158% 63%
Sell Mar Call Spread +59% 50%
Buy Mar Put Spread +49% 53%
Sell Stock +1% 47%

* Click link to access TradeBuilder details on Must have Instant or Actual account. Subject to change due to changing market conditions. Click here to view risks regarding selling stock short.

DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services.