Another item to note is the strong overhead resistance AAPL has. The hypotenuse of the consolidation triangle also, interestingly enough, overlays with the 50-day moving average. Testes of the upper bound now have two reasons to back down. Since the low on 11/16/12, implied volatility is up 26% across the options curve and considering the triangle is suggesting that AAPL will remain range bound, perhaps long theta with strategically placed strikes can be advised, but expiring before earnings.
The NFLX chart is also interesting. Yesterday NFLX filled the 4/23/12 gap and action so far today seems to indicate that lower prices are ahead of us. Shares are currently down 0.5% form yesterday’s close. This weak action is in line with the general market, but some extra selling pressure perhaps can be expected. Now that NFLX has filled the gap, price has traded at all the appropriate levels…this is vital for all the folks that have been shorting into this move are/have been wrong and need to cover at the least opportune time.
NFLX has been a controversial stock at best. Many eloquent arguments long or short the company can be made. The next untouched gap sits at $185 to $205, about 83% away from current levels. January 2014 options suggest that there is a 10% probability we reach the $185 level by Jan 2014 expiration. Should an epic short squeeze occur, this gap could be expected to fill too.
Feel free to e-mail any comments, feedback, suggestions, or general inquiries to… Author salernoma@mx.lakeforest.edu
