![\"\"](\"https:\/\/www.optionsanimal.com\/wp-content\/uploads\/2017\/12\/aap-chart-2017-12-08.png\")
<\/p>\nOptionsANIMAL Raises Target Price for Apple (AAPL) to $190.75 and Expects Implied Volatility to Rise – Pleasant Grove, UT<\/p>\n
Despite technical warning signals, Apple Inc. (AAPL) shares still have some room for growth.\u00a0 Volatility behavior indicates there may be opportunities for options traders.<\/p>\n
OptionsANIMAL\u2019s proprietary approach to trading begins by determining the direction.\u00a0 There three primary reasons for stock movement:\u00a0 Technical, Fundamental, & Sentimental.\u00a0 Each must be considered when evaluating the direction of a stock.<\/p>\n
Technical analysis indicates that Apple is likely to trade sideways for the short-term.\u00a0 Over the past few weeks, there have been indications that the recent bullish trend has lost some steam.\u00a0 This can be seen by a crossover in the 5-day and 20-day exponential moving averages (EMA) which occurred at the beginning of December.\u00a0 About a week before that, there were signals from both the Moving Average Convergence and Divergence (MACD) and the Relative Strength Index (RSI). \u00a0When the MACD crosses below the signal line, this is an indication that the stock is no longer bullish.\u00a0 When the RSI crosses below the 50-line, that is also indicative that the stock is no longer bullish.\u00a0 When the 5\/20-day EMAs, MACD, and RSI signals occur together, it is typically considered a strong bearish signal.\u00a0 However, when they happen over a few weeks, that is considered a stagnant signal.<\/p>\n
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This behavior is not uncommon for Apple before earnings \u2013 more on that below.<\/p>\n
Apple is one of the best run companies in the world.\u00a0 Analysis of the fundamentals indicates that.\u00a0 Utilizing the same approach that lead Warren Buffett to add shares of Apple to the Berkshire Hathaway portfolio, it is clear that delivering shareholder value<\/em> is of the utmost importance to Apple management.\u00a0 Many people ascribe product innovation and quality of Apple to Steve Jobs.\u00a0 He deserves full credit for that.\u00a0 However, his real legacy is the commitment growing shareholder value.\u00a0 Few executives can claim the same sort of performance.<\/p>\n Warren Buffett\u2019s approach to valuing a company is no secret \u2013 he shares it with anyone who reads the Berkshire Hathaway annual reports.\u00a0 His approach is 1) determine the owner earnings<\/em> of a company; 2) forecast the future growth; and 3) a discounted cash flow analysis of the present value.<\/p>\n Following is a chart of Apple\u2019s owner earnings over the past ten years.\u00a0 The consistent growth over this period makes it one of the most impressive performances among the entire S&P 500.\u00a0 It is the reason why Buffett decided to add AAPL to the Berkshire Hathaway, and it has quickly grown to be the third largest holding in his portfolio.<\/p>\n OptionsANIMAL\u2019s discounted cash flow analysis of these owner earnings places a per share value of $190.75.<\/p>\n While does not make sense to buy or sell an equity solely because someone else likes it, you can do far worse than following Warren Buffett\u2019s trades.<\/p>\n The third leg of analysis is to consider the Sentimental indicators.\u00a0 OptionsANIMAL\u2019s sentimental evaluation incorporates implied volatility, put\/call ratio, and short interest.\u00a0 All of these agree with a rangebound trend until the next earnings cycle.\u00a0 While the earnings date has not been scheduled, it is typically around the last day of January.\u00a0 As of today, the sentimental analysis indicates that the next earnings event could push AAPL to $158 or $182.\u00a0 Because of that, we expect that the implied volatility will rise as the earnings event approaches.<\/p>\n Considering this analysis, we expect that AAPL stock will be stagnant to moderately bullish between now and the January 2018 earnings event.\u00a0 It is difficult to determine a stocks direction because there are always unseen events which are likely to impact a stock\u2019s direction.\u00a0 However, it is not difficult to forecast where the implied volatility trend between now and the earnings event will head.\u00a0 For the past 40 Apple earnings implied volatility has increased as the event approaches.\u00a0 It is almost guaranteed that implied volatility will rise.<\/p>\n Additionally, considering the behavior of AAPL prior to earnings events, it is typically a period when AAPL\u2019s historical volatility is low.\u00a0 AAPL tends not to have major upsets in trends prior to earnings.\u00a0 This is because earnings is so important to AAPL\u2019s valuation, traders tend to wait until after the event to make decisions about buying or selling AAPL.<\/p>\n Note that we discussed two types of volatility: historical and implied.\u00a0 It is important that traders understand the important differences between these two.<\/p>\n Given a stagnant to bullish trend with rising implied volatility, traders would structure a trade that leverages a bullish trend – delta positive; the passing of time – theta positive; and rising implied volatility – vega positive.\u00a0\u00a0 There are a few trades which would work well in this trend, but it seems particularly well-suited for a calendar, diagonal, or collar.<\/p>\n","protected":false},"excerpt":{"rendered":" OptionsANIMAL Raises Target Price for Apple (AAPL) to $190.75 and Expects Implied Volatility to Rise – Pleasant Grove, UT Despite technical warning signals, Apple Inc. (AAPL) shares still have some room for growth.\u00a0 Volatility behavior indicates there may be opportunities for options traders. OptionsANIMAL\u2019s proprietary approach to trading begins by determining the direction.\u00a0 There three […]<\/p>\n","protected":false},"author":5,"featured_media":10198,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"default","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-gradient":""}},"footnotes":""},"categories":[31],"tags":[],"_links":{"self":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/posts\/10191"}],"collection":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/users\/5"}],"replies":[{"embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/comments?post=10191"}],"version-history":[{"count":0,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/posts\/10191\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/media\/10198"}],"wp:attachment":[{"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/media?parent=10191"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/categories?post=10191"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.optionsanimal.com\/wp-json\/wp\/v2\/tags?post=10191"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}![\"\"](\"https:\/\/www.optionsanimal.com\/wp-content\/uploads\/2017\/12\/aapl-owner-earnings-bar-chart.png\")
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