$AAPL: One More Thing

by Dan November 11, 2015 10:43 am • Commentary

I know I had a lot to say about Apple (AAPL) yesterday (Trade Idea – $AAPL Harvest), but I wanted to highlight on more thing:

Last night on CNBC’s Fast Money my friend Carter Worth, chartist-extraordinaire from Cornerstone Research highlighted what he views as a topping formation in AAPL’s chart, which could yield a break of support at $110, and ultimately a move back to $100 (watch here):


Carter makes a compelling technical case for continued relative under-performance to most of its mega cap tech peers, but if the stock’s 45% peak to trough decline from Sept 21st, 2012 to June 28th 2013 showed us anything it’s that the broad market did not need AAPL to participate to move higher, despite it then being the largest market cap in the world, as it is today. During that same time period the S&P 500 advanced about 7%.  So my take-away is that Carter could be very right on AAPL but it’s not a no brainer to extrapolate what it means for the broad market.

Back to my post from yesterday:

Today AAPL is down 3.25% on a research note from Credit Suisse suggesting that orders to component suppliers to the iPhone have slowed of late, which could speak to a deceleration in iPhone unit sales at a time the company faces difficult comparisons from its 6 cycle upgrade from a year earlier. This is all noise, until it’s not, but I suspect that the stock down 13% from its all time highs in the spring and its below market and peer multiple reflects a lot of this pessimism. The company’s massive commitment to capital return will likely keep the wheels on the bus, one of the main things the stock did not have going for it during its 45% peak to trough decline from Sept 2012 to June 2013.

If you agree with Carter’s take that at the very least the stock may be done going up for a bit, and my fundamental take that the stock lacks catalysts for the time being, then long holders who do not want to sell, should at the very least consider an overwriting program by selling out of the money calls to add potential yield (yesterday we took it a step further and detailed a the sale of a strangle against long stock), or look to tactically hedge by selling out of the money calls and buying out of the money puts to define a range where you could participate on the upside, but have protection on the downside.