Apple stock is trading near record highs and above a recent breakout level. The Daily Breakdown hones in the charts.
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What’s Happening?
The record-long government shutdown came to an end and…stocks took a dive? US equities stumbled on Thursday, with small caps and tech leading the way lower as the Russell 2000 fell 2.8% and the Nasdaq 100 slipped 2%. The S&P 500 and Dow each fell 1.7%.
It didn’t help that we had some Fed commentary on Thursday that leaned more hawkish — “hawkish” meaning policy that’s less liquidity-friendly, which for instance, would not be supportive of cutting interest rates.
As we talked about yesterday, the markets are no longer focused on the government shutdown. In fact, one could argue that since stocks did pretty well while the government was shut down, reopening doesn’t really have that much of an impact. Still, this felt like a classic “buy the rumor, sell the news” reaction.
Now investors must look ahead — which includes earnings from Nvidia and an eventual deluge of economic reports, since many were delayed during the shutdown. Investors also have to digest the current landscape, which includes stocks not quite at least week’s lows but quickly approaching those levels, and a crypto market that’s under renewed short-term pressure.
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The Setup — Apple
Apple had been under pressure until this summer, when shares found a strong spark in August and eventually rallied to new record highs. Despite Thursday’s market-wide slip, Apple stock held firm as it sits just below record highs.
With the recent rally, Apple stock broke out over the key $260 resistance level. Should shares pull back over the next few days or weeks, technical investors might be keeping a close eye on this level. If AAPL can stay above $260 and the 50-day moving average, more upside potential is possible. However, a break below these measures could usher in more selling pressure.
Options
As of November 13th, the options with the highest open interest for AAPL stock — meaning the contracts with the largest open positions in the options market — were the January $270 calls.
For options traders, calls or bull call spreads could be one way to speculate on support holding on a pullback. In this scenario, options buyers limit their risk to the price paid for the calls or call spreads, while trying to capitalize on a bounce in the stock.
Conversely, investors who expect support to fail could speculate with puts or put spreads.
For those looking to learn more about options, consider visiting the eToro Academy.
What Wall Street’s Watching
Warner Bros. Discovery popped in after-hours trading on reports that Netflix, Paramount, and Comcast are preparing bids for the company. “The initial deadline to submit non-binding first-round bids is Nov. 20,” according to the Wall Street Journal. Dig into the fundamentals for WBD stock.
Investors are keeping a close eye on Bitcoin, as the top cryptocurrency by market cap broke back below the key $100K mark on Thursday. The selling pressure also weighed on Ethereum, XRP and other top cryptocurrencies. While crypto is seemingly trading with a lower correlation to tech stocks, investors are still looking to the crypto market as a leading indicator for risk-on assets and are looking to see when and where these assets will find their footing. Check out the chart for BTC.
Disclaimer:
Please note that due to market volatility, some of the prices may have already been reached and scenarios played out.