If you're sweet on Apple, now might be the time for a bullish trade.
Things are starting to look up for the iPhone maker, which reports earnings on July 30. From its reported deal talks with Intel and its suppliers beginning to post strong earnings results, Apple has been on the rise — and, if you ask TradingAnalysis.com founder Todd Gordon, that climb could continue.
"I like the technical position of Apple here, and also how earnings have been received here early on in the earnings season," Gordon said, adding that the stock could push above a downtrend going back to 2018 if the results are positive.
The options market is also factoring in Apple's spikes that closely followed the last two earnings reports, Gordon said Tuesday on CNBC's "Trading Nation." It predicted a high probability of Apple — which closed around $209 a share on Tuesday — staying between $198 and $218.57 after the release.
"I think we play the upside," said Gordon, suggesting a "call butterfly" trade. In effect, the person putting on that trade would buy one call, sell two, then buy another with a goal of rising to the middle strike.
"The expected move is $218.57; we're lined up around that 217.50 for the middle strike," Gordon said. That $217.50 level would represent a new 2019 high for Apple, if the stock were to reach it.
The entire trade cost about 76 cents, with a maximum potential loss of $77 if Apple breaks below the lower barrier or rises above the $222.50 level.
"If we were to get that expected move, that's where the profit starts to come in. You could potentially make $420," the technical analyst said. "So, this is a nice, defined-risk way to play earnings on the upside using a technical break through resistance."
However, investors interested in this trade need to know that if it doesn't work out, they won't be able to navigate out of it, Gordon said.
"Remember, this is a trade that's meant to take advantage of earnings, so you can't manage it if the trade doesn't work," he said. "Position-size according to what works for your specific portfolio or trading account and you should be fine."
Apple gained less than 1% in Tuesday's trading session. It was down slight in Wednesday's premarket, trading at $208. The stock is up over 32% this year.
