I have been watching Apple Inc. ( $AAPL ) form a symmetrical triangle for the past two months. This is a Continuation Pattern, which means that the triangle is used as a way to head higher if the trend has been upwards and with AAPL it has been.
A symmetrical triangle is generally regarded as a period of consolidation before the price moves beyond one of the identified trendlines.The sharp price movement that often follows a breakout of this formation can be captured by traders who are able to identify the pattern early enough.
The Symmetrical triangle pattern needs to have a few things working for it and we will check them off here.
1. Trend Should be at least a few months old: Check !AAPL is from march to december.
2. Duration of pattern should be at least 3 weeks old: Check! This pattern is 6 weeks old.
3. Breakout occurs between 1/2 to 3/4 of the way through the pattern: Check! It’s about 3/4 of the way.
So now that we checked a few major points off let’s look at a price target. We take the distance from the widest end of the triangle and in this case is around $20.
From the breakout at around $200, this being a bullish trend apple has been in we add $20 to the upside and put it at ~$220 for a potential breakout target.
There are a few hurdles here for AAPL though the $207-208 area is major resistance so if it can break that $220 is well in sight.
I bought a January $230 Call option at 0.23 to prepare for the move instead of putting major capital in the stock
Here is the chart (Click to Enlarge)
Update: I tried posting it last night but my host was down so i gave up. $AAPL is currently at ~$207.50 (in between the resistance I mentioned)
I have also sold my Call options for a hefty 140% Profit from yesterday’s buy-in price, if Apple breaks above 208 I might be re-buying some.