One of the best movers this month has been APC, which rallied 20 points on news that they reached a settlement in the Tronox case. Apparently with a number attatched ($5B) that wasn’t as bad as what everyone expected, investors can look for a less risky business. That got priced in.
We’re now seeing a continuation pattern that I call a pop, drop, and chop. It’s kind of like a bull flag pattern, except the top of the pattern is actually less than the original move higher:
100 is a major psychological level as well as a key resisitance level. If it is breached, the “chop” phase of the pattern will complete and price will most likely head back to retest the recent highs at 103.
If APC breaks above 100, buy the May 100 call with a stop under 95.48. If we see a swift move to 103, sell half on the trade and let the rest run. Earnings are May 6th so make sure to be out before then.