Tuesday, July 22, 2014

Thoughts on Apple

Since we began contrasting Apple with the historic oil comparative in December of 2012, we have utilized it as a mean reversion template of comparable market trends. Both were the deepest, most dominant and crowded trades of their day and have expressed very similar reflexes as they boomed from the mean, busted below - and now seen with Apple today - bounced its way back above long-term trend performance. 

Coming into Apple's Q1 earnings report this April, we felt momentum was still presenting an upside bias for the stock - as we had looked for another stair higher to be climbed in the range. 

With Apple very close to breaking out to new all-time highs as it rolls into another earnings report this afternoon, underlying conditions have expended considerable momentum and present the real risk of reversing the positive Q2 performance trend.  
As shown above, Apple extended its run from its last earnings report - even exceeding our upside target range and presenting the first audible in nearly eighteen months from when we initially started commenting on the comparative momentum profile. With that said, the audible was translated with a positive outcome for the stock, which has maintained our interest for comparative bearings - as we have held a favorable long-term opinion of the stock since April of last year, despite our expectations of another retracement move lower.

Considering the current disposition, both above its long-term mean and exhibiting what we read as expended and divergent momentum - we expect the latest advance to reverse lower through this years range.  
Although the above longer-term study is off-set by the previous configuration (first chart) and Apple's even loftier trajectory, the congruences expressed between the two performance profiles are evident when Apple is pivoted on the comparative regression axis. 
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For further reading on this concept - see some of our previous notes on Apple:

Apple Cider
Reboot Complete
Apple Reboots 
Apple Picking
Fruit Salad
Apple Turnover
The Universal Law of Gravitation