Apple IncShort
AAPL - Short Term Bear - Swing Trade
Updated
AAPL Here's the details of my trade Short on AAPL....
Daily Chart:
- QQE Signal Short
- Divergence on the RSI
- Cross down on the MACD
4hr Chart:
- QQE Signal Short
- Strong Divergence on the RSI
- Cross down on the MACD
Fundamental Support:
- PE Ratio overvalued at 42, historic PE ratio range 12-28 excl Covid 2020
- Buffet has cut Berkshire Hathaways stake in Apple by 60%
- 2 consecutive years of flat YoY revenue, with declines in Iphone, Wearables, Ipad, Mac offset by YoY growth in Services
- Flat YoY Revenue in USA, Asia Pac, and Japan, with declines in Greater China
- 2 consecutive years of YoY Net Income decline, EPS benefit from share buybacks of 1B since 2022
- Operating Margin improvement, however primarily driven by product mix (decline of core products and growth of services business)
Recent Developments & News
- Next significant economic data is ADP employment report Wed Jan 8th and Unemployment Rate Fri Jan 10th
- A lower or higher employment figure than forecast could move the market and is a potential risk to the short position if employment figures are positive
- However, inadvertently, higher employment figures will reduce the likelihood of FED rate cuts, offsetting some of the upside potential
Target:
- Previous ATH at 236 ~-5.5% from current price
- Stop: A break above $260
- Possible profit taking at 50 day moving average near $237-$238 range
- Previous declines ranged from 8-15 days to reach short term lows, estimating similar timeframe with a possible break of support line, retest, and further decline
Risks:
- The rollout of Apple Intelligence sparks strong Christmas sales and upgrade cycle for Iphone 16
- Investor optimism for Apple Intelligence drives continued buying in AAPL
- A bounce off support and continued move higher
Overall:
AAPL has rolled out Apple Intelligence in several major markets with some features still coming soon. It would be an understatement to say that the development, features, and rollout have be clumsy at best. Not only has the rollout and announcements been underwhelming, but Apple looks to be playing catchup with technology competitors have already well established in the market.
Apple continues to be a loved brand worldwide, and there's no denying the brand loyalty is still strong, however lagging technology, premium prices on their products, high PE/valuation with flat to declining revenue and profitability. Until Apple can either reclaim it's technological advantage by becoming a leader again in the market, or reposition it's product offering and pricing to drive demand, it's difficult fundamentally see why the stock is worth the PE with so many other companies in market with new innovation and growth potential comparatively.
This isn't to suggest Apple will collapse, but a correction technically and fundamentally is warranted near term with broader economic risks and technological missed expectations that could warrant lower prices.
My Position:
5 Put Options
$250 Strike, Current Price $252.20
Expiration Friday Jan 10th
Average Price is $2.00 a contract
Investment $1000
Target $10.00-$16.00 (8-14:1 Profit Loss Ratio)
Stop $1.00
Potential Loss -$500
Potential Gain $4000-$7000
Note
Here's the latest update on APPL today 02/01/2025 EST. Note I'm based in Australia!
A large move today for APPL given the news that came out highlighted below and also a broader market move down which included Tesla reporting lower than expected sales in the 4th qtr. Here's the current status on the charts.
1hr Chart
The stock dropped below previous support of $244 to a low of $242 and moved back up to $244 in what looks to be a retest by EOD.
The RSI fell to 20 on the 1hr which is a historical support level, so it's not surprising the stock found a bounce point here at $242 and traced back higher to $244
4hr Chart
Strong move down on high red volume through the 50 MA. Still room on the RSI for a continuation downwards.
QQE Signal is still short and is a key indicator I'll be watching to move to Long to determine the bottom of the move
Daily Chart
Strong move down, similar to 4hr chart analysis
News Today...
iPhones fell 8% in November, largely because of a 28% decline in China. 20.7m Nov units
In a bid to revive the sales slump, Apple will be offering discounts on several iPhone models from January 4 to 7 in China.
APPL is also yet to roll out any AI features in China due to regulatory hurdles.
This news is in line with the analysis I wrote in the original post. APPL has very strong competition, particularly in China, and if the technology doesn't improve than it will have to revert to price reductions to drive sales, and that is a slippery slope to walk on. There are still risks of robust Dec sales news or actions taken by APPL to the short position, so maintaining a cautious approach and sticking to the plan.
Current position....
I'm currently maintaining full position
Option price EOD ~$6.50-7.00
No change to Target price range
Moving Stop Loss to Breakeven at $2.00
Trade closed: stop reached
I missed a signal at the end Friday's trading session on the 1hr chart. At the end of the day the QQE signal triggered Long and I missed it.
I noticed this weekend and recognised we're going to possibly see a short wave up on APPL before a continuation downwards. Therefore, with Jimmy Carters death and Thursday's market session closed. The time to expiration was too short and I set my stop loss at $5.00.
Not the end of the world....I stopped out with 2:1 P/L Ration and +$1,300. There's worse things in the world, but still not as well as anticipated. I'll continue to monitor and post additional analysis as I see it.
Feel free to follow me to see other trades I'm analyzing
5 APPL Put Options Strike $250
Bought $2.46 Average
Sold $5.00 Average
Total Profit $1,270, 2:1 P/l Ratio
Total Portfolio $3400
Portfolio since deposit of $2,000 Dec 18th: +$1,400
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