(Note: The author of this fundamental analysis is a financial writer and portfolio manager.)

One would think that with all the negative commentary floating around the iPhone X, shares of Apple Inc. (AAPL) would be struggling. But that has hardly been the case with the stock trading higher by about 12% over the past three months. In fact, shares of Apple have been performing so well that the stock is about to have a significant technical breakout, which could send shares of the stock as high as the psychologically important $200 mark, a rise of about 14%. (For more, see also: Apple Stock Sliced on Report of Weak Iphone X Demand.)

Options traders are betting on a significant rise in shares with bets that take the stock above $200 by expiration on June 15. Further, despite all the nervousness around the iPhone's slow start, analysts' revenue estimates have climbed over the past three months for Apple's fiscal second and third quarter, by 6 and 4%, respectively.

Big Breakout

The market is speaking loud, and for the most part, it seems to suggest it just does not believe all the conjecture about weak iPhone demand. The chart below shows how the stock has been forming a rising triangle, which is a bullish continuation pattern. It tells us that the stock is setting up for a significant breakout, one that could help lift shares on towards $200. 



Options Bets

The options traders are betting shares will rise as well, to around $203 by expiration on June 15. The $200 strike price has the most substantial open interest, with nearly 35,000 call contracts open, and carries a notional value of about $10 million. The puts with the most significant open interest are at the $155 strike price, with nearly 11,000 contracts of open interest, and a notional value of about $3.5 million. 

(Interactive Brokers)

Revenue Estimates

But not only that, consensus revenue estimates for Apple have remained unchanged over the past three months, while the next two quarters have seen those revenue estimates rise. One would think if iPhone demand was weak than analysts' estimates would be falling. Meanwhile, Apple suppliers like Broadcom Ltd. (AVGO) and Jabil Inc. (JBL) which reported fiscal results in the middle of January both easily beat estimates for their quarter and also issued upbeat forward guidance. (For more, see also: Why Apple iPhone X Worries May Be Overblown.)

AAPL Chart

AAPL data by YCharts

All of the information paints a pretty positive picture for Apple heading into results on February 1. For now, the market would seem to suggest that anything but bad news will be reported. Now we wait. 

Michael Kramer is the Founder of Mott Capital Management LLC, a registered investment adviser, and the manager of the company's actively managed, long-only Thematic Growth Portfolio. Kramer typically buys and holds stocks for a duration of three to five years. Click here for Kramer's bio and his portfolio's holdingsInformation presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Upon request, the advisor will provide a list of all recommendations made during the past twelve months. Past performance is not indicative of future performance.


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