Weekly Options Trade Analysis for AAPL
Trading Recommendations— AAPL appears to be poised for a breakout from this chart pattern. A weekly option trade should consider a bullish play first since 75% of all Symmetrical Triangles are continuation patterns. Straight option buys or a Bullish Spread may be in order here. But we must look for signs in the indicators of possible changes to break out.
Bollinger Bands— AAPL presently sits at the bottom of the Bollinger Bands and we have two options ahead of us. Since we have a developing pattern here, we have room to slide down the lower band like we did last time on our formation, or we can bounce from this low and start to move up again to the top of the band.
RSI— since AAPL has a tightening up of the stock candlesticks, the RSI has been following the same direction. We have higher lows and lower highs, so on this 60 minute chart we have no sure sign to follow through the RSI.
MACD— following in the same steps as the RSI the MACD is showing AAPL consolidating getting ready for a move out of this particular pattern. Like the RSI, AAPL is giving us higher lows and lower highs. Supporting the chart movement but not giving us any particular signs.
Chart— the indicators are not giving us a whole lot of signs as to the direction of AAPL. They merely appear to be supporting what we already are see in the chart. The 60 minute is showing the Symmetrical Triangle. The symmetrical triangle, which can also be referred to as a coil, usually forms during a trend as a continuation pattern. The pattern contains at least two lower highs and two higher lows. When these points are connected, the lines converge as
they are extended and the symmetrical triangle takes shape. You could also think of it as a contracting wedge, wide at the beginning and narrowing over time. There are instances when symmetrical triangles mark important trend reversals; they more often mark a continuation of the current trend. Regardless of the nature of the pattern, continuation or reversal, the direction of the next major move can only be determined after a valid breakout.
Roughly 75% of symmetrical triangles are continuation patterns and the rest mark reversals. The reversal patterns can be especially difficult to analyze and often have false breakouts. Even so, we should not anticipate the direction of the breakout, but rather wait for it to happen. Further analysis should be applied to the breakout by looking for gaps, accelerated price movements, and volume for confirmation. Confirmation is especially important for upside breakouts.