Apple will report its quarterly earnings today after the close.
The key numbers that Wall Street and Investors will be focused on are:
- iPhone sales – In previous earnings Apple’s CEO, Tim Cook, mentioned anticipation for iPhone8 caused a “pause” in iPhone sales
- Services – Apple’s services performance.
- Sales in China
Besides the numbers, Investors will also want to hear clues about iPhone8 timing – Will it be ready to be launched in September… or not?
Bearish Harmonic Pattern in focus
In mid-May, AAPL entered the PRZ of the bearish Crab pattern, near 160$, and its price fell 15$ to the nearest support zone – 145$
The Market’s bullish momentum, the longer term trend and the weekly Fast MA line (support line) kept AAPL’s price from falling to the next support zone – 135$.
Last week AAPL’s price launched a bullish pullback move that ended when it reached the 78.6% Fibonacci reversal level.
The 78.6 Fibonacci reversal level has sent AAPL’s price back to the weekly Fast MA line and to a minor daily support zone – 148-150$.
The S&P500 futures are in green as I’m writing this blog post.
If that will be the case when the markets will open, AAPL’s price will probably open above the 148-150$ support zone.
That will present the following trading scenarios for AAPL’s earnings:
As long as AAPL’s price holds above 148-150$, there’s a chance that we will see its price re-testing the PRZ of the weekly Crab pattern.
The daily chart above shows that we also have a bearish Butterfly pattern (red) that will also complete near 160$.
The bearish Butterfly formation supports the potential bullish scenario by assuming that the price will eventually complete the pattern – This is what we call “Aggressive C entries” (in this case a bullish entry)
The bearish Butterfly pattern also supports the potential reversal scenario near 160$. Not only that we have a weekly Crab pattern, now we also have a daily bearish harmonic pattern that completes in the same exact place.
That makes 160-165$ a potential reversal zone to monitor in the near term future (not necessarily today).
Another bearish scenario is the breakdown of the 148-150 support zone – If that support zone will fail to hold the price above it, we will probably see AAPL’s price sliding towards 140$ and the weekly support zone 135$.
The strongest technical scenario among the trading scenarios mentioned above is the bearish scenario near 160$.
It requires AAPL to rally almost 8% from yesterday’s close and perhaps today’s earnings will give it the necessary push.
If you are bullish (about the market or about AAPL), you can consider buying AAPL before earnings and bet on its upside potential.
One way to do it is to sell puts, or put spreads below 140$ – If AAPL will rally you will benefit both from the move and from the IV crash.
If you are bearish, perhaps selling deep out of the money calls (above 165$) is an option that you should explore:
- If AAPL will rally to 160$ and reach the PRZ, there’s a chance it will be its top. So you may lose at first, but the position will still be able to turn profitable if the patterns will push AAPL down again
- If AAPL will crash below 148$, you will be able to close the positions with MAX profit.
Obviously, these are just examples of how you can trade each scenario and these aren’t trading recommendations in any way.
Earnings are binary events that can violate any setup or pattern – No matter how strong it may look.
Do your own analysis and make sure that you keep your risk under control by following your risk management rules.
What is your view on AAPL?
Will you trade it and how?