Apple is in for a 10% year-end rally, charts suggest

Apple shares have fallen more than 2 percent from its recent high, but one would be wise to buy the dip, says Todd Gordon of

According to Gordon, Apple has actually fallen into a "corrective support," where the stock is sitting in the middle of an uptrend parallel channel, suggesting it is neither overbought nor oversold.

The upper limit of that channel, says Gordon, is around the $185 to $190 level, which he says Apple could reach this month. That's about 8 to 11 percent move higher from current levels of around $170.

His positive outlook on Apple lies with the stock's near-term moves. While earlier this week Apple had slid back to the late October support level of $165, he does see "a three-step pattern" that suggests the stock will soon bounce higher.

"We did take out the lows from last week and triggered some sell stops, [there was some fear in the] market but then you can see Apple recovering nicely here," he said Thursday on CNBC's "Trading Nation." "It looks like we should be able to move on up towards the $180 level into late 2017 and early 2018, and perhaps reach $190 to $200, which will take Apple to a trillion dollar market cap."

To take advantage of the possible rally in Apple, Gordon sold the Dec. 29 weekly 170-strike puts and bought the Dec. 29 weekly 165-strike puts for a credit of $1.58, or $158 per options spread. This $158 is his maximum reward for the trade, which he would get if Apple closes above $170 on Dec. 29 expiration.

"If we break back below these highs at about $165, I'm going to start being concerned about the outlook for this breakout," he said. "I really want to see this former resistance hold now as support. If we break through $165, close the trade."

Apple has surged 48 percent this year.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Michael Santoli

Michael Santoli joined CNBC in October 2015 as a Senior Markets Commentator, based at the network's Global Headquarters in Englewood Cliffs, N.J.  Santoli brings his extensive markets expertise to CNBC's Business Day programming, with a regular appearance on CNBC's Closing Bell (M-F, 3PM-5PM ET). In addition, he contributes to CNBC and CNBC PRO, writing regular articles and creating original digital videos.

Previously, Santoli was a Senior Columnist at Yahoo Finance, where he wrote analysis and commentary on the stock market, corporate news and the economy. He also appeared on Yahoo Finance video programs, where he offered insights on the most important business stories of the day, and was a regular contributor to CNBC and other networks.

Follow Michael Santoli on Twitter @michaelsantoli

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