For all the attention given to AAPL this year, from the disappointing fiscal Q1 results to the company’s Accelerated Share Repurchase equaling $14 billion worth of their own stock in a matter of weeks, the stock is still right smack dab in the middle of the 3 month range.
In many ways the stock has acted rather predictably if you were just looking at the stock from a technical perspective. The 6 month chart below shows the stock stalling at the $570/575 level twice in Dec. The stock then consolidated above support at $550, and then gapped to the psychologically important $500 support level after the poor results on Jan 27th.
Prior to the company stepping in during the last week of January/ first week of February to buy back their own shares, the next stop on the downside was likely $480.
What I found most interesting about the price action of AAPL since the company announced the share repurchase after the close on Feb 6th, is that the stock kept on running, another 7.5% over the next 7 trading days, filling in the entire gap from earnings.
This type of gap fill, where the stock expended a lot of energy getting back up to the pre-earnings level after the gap lower on big volume often comes near the end of a corrective move. That’s exactly what happened in AAPL’s case, as the stock has inched lower since midday on Tuesday, after the stock just barely filled the gap at $551.
At this point, AAPL seems comfortably stuck between the $500 and $550 technical support and resistance levels. Unfortunately, options premium is not expensive enough in our view to actually play for more rangebound price action. Here is 30 day implied volatility in AAPL over the last year:
Near its 1 year low.
Buybacks naturally depress volatility, and that’s what has happened to AAPL ever since Mr. Icahn got vocal. However, the risk/reward is not sufficient to play for continued low volatility going forward, so we might simply look for another buy the dip opportunity if the stock gets near the lower end of the range, around $500.