Apple: $175 Must?Hold

Sep. 14, 2023 4:21 PM ET Apple Inc. (AAPL)

Summary

• The shares of Apple Inc. are down nearly 9% since I highlighted my bearish position in the stock in early July.
• The stock is near short-term technical support levels, and if they don’t hold, further declines are likely ahead for the stock of this tech giant.
• How I am currently positioned in the shares of Apple and my game plan for the weeks ahead are outlined below.

This article discusses the recent performance and future outlook of Apple Inc. (AAPL) stock. Here’s a summary of the key points:

1. Bearish Position: The author highlights that since posting a bearish position on Apple stock in early July, the shares have declined by nearly 9%.
2. Technical Support: The article notes that Apple’s stock is currently near short-term technical support levels. If these levels do not hold, further declines are anticipated.
3. Position Adjustment: The author mentions that they have taken some profits from their initial bearish position to break even in a worst-case scenario. The ultimate profitability of their position will depend on whether Apple’s stock can maintain the $173?—?$175 range.
4. Valuation Concerns: The article points out that Apple’s valuation is a concern. The stock is trading at around 29 times trailing earnings and nearly seven times trailing sales, which is considered high. Additionally, both earnings per share and sales are projected to fall in FY2023, making it challenging to argue that the stock is undervalued.
5. Market Conditions: The author believes that the overall market is overbought, anticipating a recession in the first half of 2024. They also note that Apple is trading at a premium compared to the S&P 500 based on various valuation metrics, despite the expected sales and earnings declines in FY2023.
6. Momentum Trading: The article mentions that algorithmic trading programs, often based on momentum and AI, play a significant role in trading volume. If Apple’s stock breaks technical support, these programs could drive further declines, especially as the stock is already trading below its simple moving average.
7. iPhone 15 Launch: The recent launch of the iPhone 15 did not generate the usual excitement and resulted in a three percent decline in Apple’s stock. The new iPhone received mixed reviews, which could impact trading sentiment.
8. Game Plan: The author’s strategy is to hold their remaining bear put spreads in AAPL until the end of the next week to see if the key short-term support levels at $173-$175 are breached. If the stock closes in the $170-$172 range, they plan to maintain their original position. If support holds, they will take profits from the position, which expires on October 20th. If AAPL’s stock rises back to the high $180s/low $190s, they may consider reestablishing their position.
9. Market Impact: The article suggests that if Apple’s stock does not hold its support levels, it could create additional headwinds for the overall market, given Apple’s substantial market capitalization.

In summary, the author expresses a bearish view on Apple’s stock due to concerns about valuation, technical support levels, and market conditions. They outline their strategy for managing their position in the coming weeks based on Apple’s performance.

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