Webinar Reminder: Summer Trading Strategies – A Return to Volatility? – Mon, Jun 17, 6:00 PM EDT
Registration URL: https://attendee.gotowebinar.com/register/84096497664919552
MorningWord 6/5/13: This coming Monday in San Francisco, AAPL CEO Tim Cook will take the stage at the company’s World Wide Developers Conference “WWDC”, and make no mistake about it, expectations are running hot. Despite the strong likelihood of little new tangible product news. Last Thursday, Enis highlighted Goldman Sachs’ derivative research team’s suggestion (here) to buy June 450 calls in front of the event, as they expect:
this event to once again be a positive catalyst for shares – this time driven by refreshes of existing services (iCloud and Siri) and/or a preview of the new iOS7 operating system. The options market has underestimated the positive nature of this event in the past. Over the past 10 years, looking from 10 days prior to WWDC to 1 day after, shares averaged a +5% return and implied volatility rose by +7% (average)
Well the stock hasn’t quite run just yet, at least not on anticipation of the event, and AAPL’s ytd performance remains a massive outlier on the downside (-15.5% ytd), just as it had on the upside in its amazing bull run up to last year. But just as many have called for a long term bottom in AAPL of late, the one month chart below shows some fairly peculiar behavior starting off with the ~10% peak to trough correction, for apparently no reason, starting on May 8th and ending on May 16th and the subsequent 7.5% rebound that has seen the stock forming a decent base at near term support.
Given next week’s conference and the potential for a positive catalyst to be announced, many market technicians have suggested that the stock could have recently made a Reverse Head & Shoulders bottom as we previously referenced courtesy of Greg Bender of Bloomberg on May 30th.
IN my early run through of product expectations from Wall Street and from the Blogosphere, it appears that few expect anything meaningful on the hardware front (possibly new MacBooks per BGR.com), while most are focused on a major upgrade of iOS (per GS via BusinesInsider.com) and added services like the rumored Pandora “Killer”, iRadio (per AppleInsider.com) or fingerprint scanning (here).
If you are buying the stock or calls for a trade into the event, my sense is that if there is any excitement it is probably going to come in the lead up to the event. If the only material product additions are in fact software or services to be released in the fall I worry that there are few catalysts if any to own the stock (aside from share repurchase) between now and the iPhone launch in late Sept.
There are 3 things I would like to see happen in the days prior to WWDC, a rally back to resistance at or around $470, a selloff to 420 and/or an implied volatility spike. A vol spike would be a nice opportunity to sell short dated vol and the price move could provide a nice entry to play for a reversal back in range.
Yesterday on CNBC’s Fast Money Halftime Report with Scott Wapner, investor Jeff Gundlach, who was short AAPL last year, recently just bought the stock around $405 and gave his reasoning for it:
To Sum Up, Gundlach thinks sentiment is poor, the stock is cheap, technicals show a base and cash distribution should offer support. Here are some quotes: “it is too cheap”, and $500 should be a fairly easy place for the stock to go to” and ” basing out in a way that is fairly encouraging” he thinks “stock is a nice inclusion at current levels given low PE”.
What’s most interesting is that Gundlach did not once mention the words new products in that interview. That is what is going to drive the stock back above $500. He did say that it is unlikely the stock sees $700 anytime soon, but given the market’s ytd rise and the unprecedented cash distribution plan, I would suggest that the stock is gonna need something more than buybacks, dividends & low PE to get this pig back to unchanged on the year ($532.17).
Last week at the WSJ’s All Things D conf, the most telling thing thing Tim Cook said on the product front was, “The wrist is interesting,” (here at 6:35pm) alluding to their probable entrance to the wearable computing market. I am not sure this is gonna do it in 2013, if iWatch is the the iThingy that restores innovation. Don’t get me wrong, there are many technical aspects about AAPL the stock that are getting increasingly attractive, but some of the core fundamentals characteristics of the company, that have driven the stock’s success in the last decade still remain allusive. I am still in the camp that a retest of the previous lows, possibly in front of, or after fiscal Q3 earnings in late July could be the appropriate spot to set up for a second half of 2013 that could see refreshes and additions to iPad, iPhone and possibly something in the living-room.