The ADX indicates a potential 61% gain. Take a look at the signal below.
Happy Financial Freedom Friday!
I teach everyday people (like me) to trade options. I do my best to write in an understandable way as if we are talking while sitting on my deck in a relaxed atmosphere.
The market was down 2 out of 5 days last week. I am typing this on Wednesday, and you won’t get this until Friday. A lot could change in a couple days.
Apple Inc. Put Potential
For today’s Trade of the Day, we will be looking at Apple Inc. (AAPL).
Before analyzing AAPL’s chart, let’s take a closer look at the company and its services.
Apple Inc. designs, manufactures, and markets smartphones, personal computers, tablets, wearables, and accessories worldwide. It also sells various related services. In addition, the company offers iPhone, a line of smartphones; Mac, a line of personal computers; iPad, a line of multi-purpose tablets; AirPods Max, an over-ear wireless headphone; and wearables, home, and accessories comprising AirPods, Apple TV, Apple Watch, Beats products, HomePod, and iPod touch. Further, it provides AppleCare support services; cloud services store services; and operates various platforms, including the App Store that allow customers to discover and download applications and digital content, such as books, music, video, games, and podcasts. Additionally, the company offers various services, such as Apple Arcade, a game subscription service; Apple Music, which offers users a curated listening experience with on-demand radio stations; Apple News+, a subscription news and magazine service; Apple TV+, which offers exclusive original content; Apple Card, a co-branded credit card; and Apple Pay, a cashless payment service, as well as licenses its intellectual property. Apple Inc. was incorporated in 1977 and is headquartered in Cupertino, California.
The chart of AAPL below is a weekly chart with an ADX indicator at the bottom. The description coming up next explains how to use the ADX.
Average Direction Index (ADX) – Strength Indicator
The Average Directional Index consists of 3 lines: Green, Red and Black.
- Green = +DI (Bullish)
- Red = -DI (Bearish)
- Black = ADX Strength Line
The DI line that is on top is in control. If the ADX line is heading up, strength is supporting the DI line that is on top and in control.
Each candle on the chart represents price movement over a 5-day (week) period; therefore, it takes weeks for trades to play out. When the -DI crosses over the +DI line, it gives a buy signal for Puts as the -DI line (red) appears as if it is in control and rising to head up on the ADX indicator, and as the ADX turns up that is even more bearish, suggesting a downward move is gaining strength. When the +DI (green line) crosses the red and the black line points up it shows an upward trend and Calls can be considered.Let’s look at AMD’s weekly chart.
The ADX -DI (red line) has crossed the +DI and the black ADX line is curling up. As long as the -DI is above the +DI, price should fall. The past several weekly candles are negative. If you want to learn more about ADX, read on or, if not, scroll down to the alert.
Potential AAPL Trade – Showing Strength
This signal could give a quick payout if it continues its downward move, and the strength of this pattern continues. I am typing this on Wednesday, and AAPL costs about $147. If AAPL’s price moves below $146 and the – DI (red line) is above the +DI, and the black line is still heading up, you could consider a Put trade. The short-term price target for AAPL is $140 and then, perhaps, lower. With the swings in past months, I am suggesting small profit targets until a market trend starts again.
Check Out How an Option Trade Could Pay Out Big Time
Option trading offers the potential of a lower initial investment and higher percentage gain. Let’s take a look and make a comparison.
If you bought 1 stock share of APPL, it would cost about $147. You would wait until it hit a bottom before you bought stock.
If you bought 1 Put option covering 100 shares of APPL with a June 17th expiration date for the 140 strike, the premium would be approximately $4.90 today, or $490 for 1 option. If price fell to $140 over the next few weeks, the premium would likely increase $3, giving $300 profit on your $490 investment. This is a 61% gain.
Trading options is a win, win, win opportunity. Options often offer a smaller overall investment, covering more shares of stock and potential for greater profits.
I like to stress when trading options, you don’t need to wait for the expiration date to close the trade. You can close anywhere along the way prior to the expiration date. It is never a bad idea to take profit.
Trading options is like renting stocks for a fixed period of time. The potential to generate steady income with options is real, and it can be transforming.
Routinely remind yourself – I believe in myself and my ability to succeed. I believe in an abundance of unlimited possibilities. The future will be awesome!
I wish you the very best,
Past potential trade update:
Last weeks we discussed AMD but the stock price did not reach the target entry so no trade would have been taken.