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

Apple Inc. (AAPL) shares appear poised to break out from its recent trading range based on the technical charts. A breakout would take the stock on to all-time highs. Options traders also appear to be betting shares of Apple can see a strong finish to 2017, as evidenced by the large number of contracts of open interest at levels higher than the stock's current price around $173.

Shares of the technology giant have been consolidating since the company reported quarterly results at the start of November. Things started to get rocky for Apple and the entire technology sector at the end of November, as investors began to worry about the recent iPhone 8 and iPhone X launches. But Apple's stock has stabilized and now appears ready to head to all-time high levels before year-end. (See also: Apple, Microsoft Will Drive 2018 Tech Earnings Growth: Moody's.)

A Technical Breakout



The hourly chart shows a technical pattern that appears to be a symmetrical triangle, which is a continuation pattern, an indication that shares are on the verge of breaking out. Should the stock clear $174, it would indicate a breakout, and would likely send the stock above prior highs of $176. 

Option Betting

(Interactive Brokers)

Options traders are betting shares of Apple break out as well, with substantial levels of open interest on the calls at the $170 and $175 strike price that are set to expire in January. 

The long straddle options strategy is suggesting shares of Apple could rise or fall by nearly 5 percent, by expiration on January 19. The cost of buying one put and call cost about $7.40, creating a range of $167.60 to $182.40.

Big Open Interest Levels

But it is the open interest that tells how traders are thinking about Apple shares, with 192,000 calls open at the $170 strike price, versus only 134,000 put contracts. Additionally, the $175 strike price calls have over 95,000 contracts open, while the $180 strike price calls have nearly 84,000 contracts open. The substantial number of calls easily outweighs the number of puts open. 

The technical side of Apple and the options market appear to be pointing to Apple shares rising over the short-term, perhaps in a sign that the market is getting past the recent jitters surrounding the iPhone 8 and iPhone X launches. 

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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