How To Trade Apple Stock Heading Into Q4 Earnings

Zinger Key Points
  • Analysts estimate Apple will print earnings per share of $1.26 on revenues of $88.74 billion.
  • Despite sinking Thursday, Apple's uptrend will remain intact unless the stock drops under the $142 mark.
How To Trade Apple Stock Heading Into Q4 Earnings

Apple Inc AAPL is set to print fourth-quarter financial results after the market closes Thursday. The stock was sliding more than 3% heading into the event.

When the tech giant printed its third-quarter results on July 27, the stock surged 3.65% over the two trading days that followed, continuing in an uptrend that topped out at $176.15 on Aug. 17.

For that quarter, Apple reported an EPS of $1.30 on revenue of $81.43 billion. The company came in ahead of the EPS estimate of $1 on revenues of $72.93 billion.

For the fourth quarter, analysts estimated Apple will print earnings per share of $1.26 on revenues of $88.74 billion.

From a technical analysis perspective, Apple’s stock looked neutral heading into the event, trading in an uptrend but forming a bearish candlestick. It should be noted that holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders, particularly those who are holding close-dated calls or puts, take on the extra risk because the institutions writing the options increase premiums to account for implied volatility.

See Also: Can Apple Weather Industry-Wide Softness And Lift Markets As It Reports Q4 Earnings Today?

The Apple Chart: Apple’s uptrend began on Oct. 13 with the most recent higher low formed on Oct. 21 at $122.65 and the most recent higher high was printed at the $152.49 mark on Tuesday. On Thursday, Apple was continuing its retracement lower but hadn’t negated the uptrend.

  • Bullish traders want to see the stock bounce up slightly to close the trading session, which will cause the stock to form a hammer candlestick, which could indicate the next higher low is in and Apple will trade higher on Friday.
  • Bearish traders want to see Apple close near the low-of-day, which will cause the stock to print a bearish kicker candlestick, indicating lower prices are on the horizon. If that happens and Apple falls under $123, the uptrend will be negated.
  • The lower prices on Thursday were taking place on lower-than-average volume, which indicates a lack of momentum to the downside. As of Thursday afternoon, Apple’s volume was measuring in at about 50 million, compared to the 10-day average of 83.78 million.
  • Apple has resistance above at $146.41 and $150 and support below at $143.51 and $139.95.

See Also: Awaiting the “A-Team": Amazon and Apple Prepare to Report as Market Digests a Mixed Earnings Picture, Above-Expectations GDP

Photo: Shutterstock

Posted In: EarningsLong IdeasNewsShort IdeasTechnicalsTop StoriesTrading Ideas