6 rules to heed ahead of today’s Apple earnings earnings report

“Apple (AAPL) reports earnings on April 24 after the close. The consensus estimate is $10.05 for earnings and $36.73 billion for revenues. Of course, as usual, the breakdown of numbers by product category will drive the price of the Apple stock,” Nigam Arora writes for MarketWatch. “Apple stock price has lately been very volatile. The gurus have advanced several explanations. Such theories include Verizon not selling as many iPhones as some expected, details of chips from Qualcomm, controversy about the number of iPads sold in the quarter, and rumors of a smaller iPad with lower gross margins.”

The following is the set of principles and rules we review prior to the earnings release of every stock in our portfolio:

1. Nobody knows with certainty what is going to happen next
2. Figure out ownership popularity
3. Imitate smart money
4. Pay attention to whisper numbers
5. Use proper position size management
6. Keep an eye on the long term

Read more in the full article here.

19 Comments

  1. This earnings report is irrelevant to Apples price action. The institutions have decided to take Apple lower and that’s that. If these earnings are fantastic AAPL gets a momentary pop and then heads lower. I’m guessing the bottom is around $520.

    1. “The institutions have decided to take Apple lower and that’s that” … that would be illegal.

      It is time that the SEC looks at how ‘analyists’ statements impact AAPL (or any stock for that matter) and also at the overall trading in derivatives (puts/shorts) rather than straight forward buy/sell orders of stocks.

      Shorts/puts are bets that a stock will go down. The selling (laying off) of these “bets” are not the same as selling the stock itself, but still these bets impact the stock price, to the detriment of everyday investors.

      There is no open reporting of shorts/puts. There is no stock ticker that instantaneously reports when shorts/puts are made. There is no way for investors to have fair, open and equal access to information and goes against what the ‘open market’ concept stands for. It gives an unfair advantage.

      1. You’re living in a fantasy world if you don’t think the institutions have ways to communicate and build mass for a change. Traders meet face to face in bars & resturants all over Wall Street. Analysts publicly make predictions in reports and guidance. The word gets out, if you speak their code.

        To think the SEC could or would change this behavior is ignorant. You can’t prosecute what there is no evidence for.

        And, if you don’t think some traders have an unfair advantage, you’re not paying attention.

      2. Good luck changing the law(s)! You’d be better served becoming an active trader.

        If you’re not interested in closing your long position when it looks like AAPL is putting in a top, why not buy an equivalent stake in Put options so that you make some money when the equity price is falling? Then, after Wall Street and the institutional investors are done screwing around, close the option position and purchase additional shares of AAPL with the money you made from the Puts.

      3. My comments were intended to be rhetorical … just venting and exercising my flair for the patently obvious. I am fully aware of how Wall Street works … both in the textbooks and in the real world. I’m long on AAPL and very long on cynicism.

  2. To be honest I’m surprised the market allowed AAPL to get up to $640. My guess is that they could not control it with all the hype and demands for the new iPad and the good feeling from the last quarter blow out.
    Only once the quarter results started to loom were they able to start with effective FUD to move the price down.
    As someone who is in for the long haul I don’t really care. AAPL were at $640 and will get there again in the next big push up.

    1. You may realize that the market is made up of buyers and sellers. There are always as many of each. When the institutions are finished buying, the retail public gets into the market and drives the price up until there are no buyers left. The price drops and when it is low enough, the public again buys and drives the prices up. The smart money (institutional) wait on the sidelines until the price rises again and then sell off some stock as the price falls.

      There is no magic or conspiracies here. It is just the market and if you buy or sell, you are part of it.

      1. You are correct with your general description. But the reality is that the brokers have means to move the market for their own ends. Cramer described that very clearly several years ago and no one denied that it occurs.
        Agreed that the public buying into positions late but usually at the behest of their advisors.
        I bought in a 72 and will keep the shares until I decide that apple is over hyped. I gave up trying the play the market game because it is too hard to predict what direction the stock will go.
        The shorting market has made the stock even more volatile and opened it up to even more manipulation.
        Is it a coincidence that the price is now at max pain just as the shorts are set to expire?

      2. Don’t try to prove that this mechanism is fair. Who do you think pays for the gains that professional traders make? Unsuspecting small investors, that’s who.

        Is that what the stock market was designed for? To feed leeches? Or for the benefit of the economy and of companies to run an honest business.

    1. Well considering that it happened as earnings approached then it is by definition a “hammering before earnings”. But is it happening because they think the earnings are going to be poor and there are some fundamental problems with the company? No way.

      1. Yes they think some parts of earnings are going to be poor. And it probably will be weak in iPhone activations. But overall I’ll bet it’s going to be good. It’s just that it needs to be perfect today in this environment. If you look at stocks other than AAPL they are mostly getting haircuts too. Look at PCLN,IBM,QCOM and others that have been hammered the last week or so. So it’s not just AAPL that’s getting beat up. And it’s not a conspiracy it’s just newbie investors getting out and probably some of the big guys shaving some of their holdings for a profit. Profit. It’s why we invest. I don’t invest in AAPL because I love the company I invest to make money. I love my iPod Touch,Apple tv,IMac,new iPad and 4S but I’m not in love with the stock. You can’t do that. So you need not try to defend the stock either. It’s a huge company and it will be fine if it deserves to be fine. If all the people who think there’s a conspiracy going on here would sink some money in AAPL when it’s down rather than bitch they’d be a lot better off. But I guess it’s easier to live in a distorted reality world than to deal with life’s ups and downs! It was just down $16. I call that a real “hammering before earnings”. My advice, take advantage of the “conspiracy”.

  3. The only rule I’ve got is buy low, sell high. My only policy is to stay long on AAPL.

    Average purchase price on my shares is about $100, so I am swimming in potential profits, and AAPL has a long way to fall before I even need to think about worrying. No shorts for me, I’m keeping my shares!

Reader Feedback

This site uses Akismet to reduce spam. Learn how your comment data is processed.