Yesterday we noted that Apple (NASDAQ:AAPL) showed its strongest signs of life since earnings, and could potentially be forming at least a short-term bottom after the months-long malaise. Traders who are long the stock would have loved some short-term gratification this morning with a gap up, but this softer open could provide additional opportunity.
The gap down might be uncomfortable and tricky, but it will give us an opportunity to see what AAPL is made of at this stage. If it can show relative strength this morning, it could be a further sign that the stock is ready to enter its earnings gap. If that scenario plays out, it could also give us a chance to add on size to the trade. Many traders like to have more size intraday rather than overnight when trying to play an oversold bounce, and this lower open provides that opportunity.
The most important level to watch over the next day or two will be yesterday's high of $459.67. If we can break back above and close above that level, I believe we could see additional momentum come into AAPL. On the other side, traders positioning long would like to see the stock $454-455. A 60-minute close below $452ish could start to create doubts about the significance of yesterday's move.
Here are the charts from yesterday:
*DISCLOSURES: Scott Redler is long AAPL