AAPL -- short

I think the AAPL "Wonderlust" show today was a disappointment to all who were hoping for an exciting new product to get announced. While the presenters did their best to hype all the "firsts" and "bests", it feels like nobody much cares anymore whether they have the latest and greatest phone. No matter what phone most of us have, it's probably capable enough, until the battery is too shot to make it through a workday. Once that point is reached, the question whether to replace the old phone with a new flagship phone, or with something at a modest price, will largely depend on the purchasing power of the consumer.

The Conference Board's Leading Economic Index for August will be released next week, and I expect it to decline again, which would be the sixteenth consecutive drop. Consumer deposits are declining, and credit is harder to obtain (not to mention more expensive). The CB is clearly flagging a coming recession, as does the NY Fed's predictive model. If the US government shuts down in a couple of weeks, it will basically seal the deal. A recession and weakening consumer finances are rarely good news for makers of high-end consumer goods.

Meanwhile, Huawei just released their first new flagship phone in years. This phone is a real contender, especially in China, where it will play well not just because of its lower price vis-á-vis the iPhone, but also because of its "developed in China" pedigree.

AAPL has posted negative year-on-year sales growth for the last 3 quarters. Despite that fact it still sports a 30x forward earnings multiple, and the stock is up 35% YTD. I am short.

I expect the rising green trend channel to get challenged, and to break, and the declining (red) channel's bottom to get tagged.

I expressed this trade with a Nov 17 175/155 put spread, which cost me $4.70. I don't have any stop loss or target price at the moment. I expect that I might adjust this spread over time, and I might even close it temporarily, but I think there's a lot more downside to AAPL.

Note

In the original trade idea I predicted that the Conference Board's next leading indicators report would show another decline. The report came out today, and it does show another decline. In addition, the trade idea suggested that the green rising channel would be challenged. This is now also the case. So, where does this leave us?

On the daily YTD chart, AAPL has -- as of today -- broken below the rising trend channel. We're just above the August low at 171.96, which is an absolute must-hold level for longs. Over the next few days I expect that level to get challenged but, given that the market is somewhat extended to the downside, I would expect that support to hold, and maybe even for to rise back towards the bottom of the broken YTD trend channel. Still, I intend to hold my short position. I believe that the market as a whole is in poor shape, and that is heavily exposed.

Note

broke through the declining trend line going back to the 2023-09-05. If it can remain above that line, I might have to reassess. But it doesn't look like it for now, and I remain bearish on the stock. Today news stories report of problems with severe overheating on the new iPhones. If these reports get confirmed over the coming weeks, it's another major issue, while none of the old problems have gotten closer to a solution.

Trade active

I'm probably getting too fancy but there's a bullish symmetrical triangle that opened up on the 30 minute chart. I don't think that this impacts the long-term picture, but this pattern has an 80% win rate, and a profit factor of 19 on the 30-minute chart. So, I respect it. Therefore, I'm adding a 177.50/180 call spread expiring on Friday to offset potential losses from the longer term put position.

Note

My PT for the call spread is 178.60.

Trade closed manually

I closed the call spread. I was unsure of this even when I did it, and it turned out to be a bad idea. Fortunately the damage was fairly contained.

Note

The selling in has continued, and if anything, accelerated. I remain long the Nov 17 put spread. This gives me another 6 weeks to expiration, and I intend to stay in it.

That said, if my expiration were any closer, or I had more to fear from theta decay, I'd be closing the trade now. is below its POC on every time scale from intraday to YTD. Both and have broken their 200 day EMAs today and a double top that emerged on the hourly chart has reached its T1 (see chart). Also, the US Dollar is a key barometer of global sentiment for me. DXY has reached the top its rising channel in what is now the 11th consecutive week of its rise, an obvious headwind for equities. I think we are at a bearish extreme, and the market is now looking for a breather. I understand that the "shutdown showdown" is still on, and there may be one more spike down in the tank, but I believe that the short-term odds are increasingly skewed towards a counter-trend rally. Again, no change to my position, but if anyone is following along with a shorter time horizon than me, I'd suggest that this might be a good exit point.

Note

In my last update I had pointed out that is oversold and that a bounce was likely to come. The timing of that comment was perfect, as the next morning brought a multi-month low, and started rising from there. But I think that this bullish interlude is now over. This morning, with $APPL at around $182 I closed the short leg of my Nov. 17th put spread at a nice profit. This is a risky move, but I remain confident that in the fundamentally bearish outlook for $AAPL. The attached chart shows the steeply rising trend channel since my last update. I believe that this channel is likely to break at this point.

Trade closed manually

I am now closing the long leg of the spread that I opened on September 12, with my original comment. I had made about $1/share on the short leg, and now collect about another $1/share on the long leg for a total return of about 40%. Not great, not bad.

My overall assessment is that this trade was more trouble than it was worth. There's probably more downside for , but I think there's a 50/50 chance of the stock getting another bounce from here. And the expiration of my puts was now approaching, which means that ithey were face faster decay. So, I am ready to take a (small) win. I might take another stab at the stock from the short side, if it recovers towards $178, or so. In the meantime I'm out.

matthias

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matthias