Apple is a salad of technicals and fundamentals

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From friend-of-the-blog victor (“tradervic”) castroll:


Traders and shareholders look at stocks and companies through different lenses. Traders keep a close eye on technical analysis with a dash of continuing fundamentals. Long-term investors and shareholders generally do the opposite; focusing their efforts on deciphering growth rates of divisions and, in Apple’s case, important metrics like iPhone ASP and service revenue growth.

As a professional equity and option trader of Apple for a decade and a half, I’m not here to say one is better than the other. In fact, I say take a smidge of both, toss them into a salad and see if the salad is any good.

So, let’s make a salad.

For my money, Apple’s technical analysis looks relatively straightforward and even provides a rare confirmation of a so-called south star. We have two facts that we can intertwine to make a quite valid assumption.

  • Apple’s all-time high is, for all intents and purposes, $233.
  • Generally, stocks revisit gaps. Apple has had two recent gaps that *may* need to be revisited, both accomplished during earnings releases prior to the last “miss” on 11/1/18.
  • Stocks like Apple, Facebook, Amazon, Netflix and Google typically move in measured moves.

In this latest downdraft, Apple has already revisited the gap of two quarters ago around $190. The next gap occurs at $167 and if one is a “gap test” theorist, $167 becomes the south star.

Both the north star, $233 and the south star, $167 are a measured move of $33 from each other, 15% on the mid-line of a $200 share price. 15% is a very reasonable measured move figure, so nothing is terribly out of line in this theory.

Great, our greens and proteins look good. Now let’s take a look a fundamentals and make the dressing for our well-prepared technical salad.

This is where our salad, in my opinion, falls apart. The fiscal Q4 earnings call famously contained the “we’re no longer reporting iPhone unit numbers” surprise. That’s the exogenous shock that turned soft quarterly guidance into a red flag that powered a downdraft.

To this add the usual seasonal dollop of FUD around factory and product line closures and cutbacks. Tim Cook told us years ago to disregard this manufacturing “noise,” but this time might be different. ‘Cause this time, Apple doesn’t give us the final score at the end of the quarter to see if rumors are right. Apple watchers now need to become detectives and reverse engineer total iPhone volume, the ever growing product line and the result on ASP, quite a tough task to be sure.

Give a person a salad, feed him for a day. Teach a person how to make a salad, feed them for a lifetime.

The salad i’ll be eating costs about $170 bucks. I’ll probably eat a third of my salad there. I’ll have a little more at $167—maybe another third or even half my salad.  If i see a salad that costs about $160, I’ll back up my salad truck. But if this apple salad goes under $157ish, I’ll need to get out of the Apple salad business and wait ’till I can find a salad for $120 – $140.

Now, I know., some of you people like to have the option of selling salads naked. I see nothing wrong with that. I’d sell someone the option to enjoy a $130 salad by February 2019 and giggle all the way to the bank.

My take: Fundamentals and technicals. Remind me: Which is the dressing?

Editors note: The author has asked me to add that his draft was submitted before Friday’s pre-market trading began.