Remember the excitement of Apple (AAPL)’s last developers meeting in June?
Programmers and developers from the company skydiving out of a plane to land on the company’s campus in Cupertino to drop the newest features of the upcoming hardware releases on their hardware platforms.
It’s an event that always gets investors jazzed-up, but usually ends with a “sell the news” move lower. The same can be said for the actual product releases, which kicked off last week with the iPhone 16.
There’s one thing that you can always – and I mean ALWAYS - count on with Apple stock.
Whether its earnings or a product launch, the stock always gets a little “buy the rumor” rally followed by a larger “sell the news” drop.
This Monday, the stock is starting the week 3.5% lower as investors are “selling the news” of last week’s iPhone 16 launch.
The problem is that the stock is in perfect position for market watchers to call today’s selling pressure something else that looks like it mat result in a 10% correction from Friday’s close.
It doesn’t matter about the event Apple has a long-standing history of investors buying the stock ahead of an event and then bailing afterwards.
Looking at the data, the stock rallies and average of about 5% ahead of its earnings releases over the last 10 years.
Product releases? The stock runs around 4% higher in the days ahead of those.
Apple’s developer’s conference? 8% in the five days leading into the event.
The developers conference gets more of a reaction as this is where they tend to announce “One more thing”, the phrase that Steve Jobs made famous when dropping the company’s next needle moving technology on the market.
In June, Apple stocks shot 13% higher on the rollout of Apple’s AI technology plans, something that investors have been waiting for as Alphabet (GOOGL), Amazon (AMZN), and others had already been implementing their AI advances into products.
Buy the news rallies rarely hang around, regardless of the company.
But in Apple’s case, the “sell the news” move is usually swift and painful. That’s what we’re seeing today.
The release of the iPhone 16 – now available for pre-order – is when we get to see where the “rubber meets the road”, and it’s not great news this morning.
Analysts from JPMorgan and Bank of America are already commenting that demand for the phone in China is weaker than expected.
This follows news that Huawei’s new “trifold” phone got more than 2.5 million pre-orders last week, ahead of the iPhone launch.
It is notable that the consumer spending data from China has shown weakness and may effect the demand for iPhone, but initial news is not strong for Apple.
Is that we’re in the middle of September.
I know, you’re tired of hearing about seasonality and September, but you need to be mindful.
Many investors hailed last week’s strength in the market as the end of the September seasonality. Stocks were on their way higher and aren’t going to look back from here.
Wrong.
Stocks, including Apple - ran right into some stubborn technical strength that could easily turn the tide on buyers.
In Apple’s case, the stock ran into combined resistance from its 20- and 50-day moving averages. Those trendlines sit just above $220.
To add a little insult to injury, Apple’s 50-day moving average is in the process of shifting into a bearish trend. This happens when the trendline begins to move lower, not higher.
It’s not the end of the trend for Apple, but there’s a catch…
Right, maybe.
The Fed is set to drop rates on Wednesday, but this is no surprise for investors.
Investors have been waiting for the Fed to lower rates wince January of this year when analysts thought there could be as many as six cuts to the Fed’s lending rate.
Eight months later and the Fed is on course to maybe lower rates two or three times this year.
The bigger point is that the Fed is not likely to surprise investors with their actions on Wednesday.
If anything, they may surprise the market by remaining cautious about how many times they will be lowering rates until the end of the year. Remember, last week’s Consumer Price Index (CPI) came in higher than expected.
Any and I mean A-N-Y hint that the Fed will remain tight with their interest rate cuts through the year-end will spark selling in the market, playing perfectly into the seasonality trends of September.
What do you do if you own Apple, or how do you make money on this potential weakness?
First if you’re an owner of Apple stock for the long term, you likely hold the stock through this potential dip.
October is Apple’s strongest performing month of the year.
The stock averages a return of 4.6% in October. The month posts gains of any magnitude 74% of the time. Historically, it’s a stock you want to own in the last quarter of the month.
That said, aggressive “traders” may want to take the opportunity afforded by Apple’s weakness in August to generate some profits.
Apple’s technicals indicate that the stock is likely to pick up some selling pressure as it moves below $215.
We’re likely to see some buying just ahead of the Fed but watch for the “dump” after the Fed to take the stock to an August or early October low of $195 to $200.
That’s where the stock’s bullish 200-day moving average sits along with the round-numbered support of the $200 price.
The latter of those ($200) served as the lows for the stock in early August, adding to the potential for Apple to make an “investable bottom” at that price.
Long-term, shares remain in a long-term bull market trend with a target price of $250.
