Why Apple Inc. (AAPL) May Have More Trouble Than Trump

Apple Inc. (AAPL) is just one of several "FANG" stocks being pressured by Donald Trump's looming presidency

Nov 10, 2016 at 2:33 PM
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Apple Inc. (NASDAQ:AAPL) is joining its "FANG" counterparts today, slumping on fears that Donald Trump's presidency will be unfavorable to tech. Trump has a history of taking aim at AAPL, criticizing its outsourcing practices and refusal to unlock the iPhone of San Bernardino shooter Syed Farook. In fact, earlier today, Apple CEO Tim Cook sent a reassuring memo to his staff, promising the company will remain "open to all" following a divisive election season.

With that in the backdrop, the tech stock was last seen 2.3% lower at $108.30. This comes as a surprise, considering AAPL has been testing its historically supportive 80-day moving average in recent days. By the numbers, the shares have hit this trendline nine times within the past three years, and have averaged a five-day return of 1.9% (with two-thirds positive), as well as a 21-day gain of 5% (with three-quarters positive).

If AAPL does in fact diverge from its historical trend of bouncing off the 80-day, recent call buyers could get burned. During the last 50 sessions at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly twice as many calls as puts. The resultant call/put volume ratio of 1.94 ranks only 10 percentage points from a 52-week high.

Likewise, bullish brokerage firms may need to start rethinking their positions. At last count, 27 analysts had dished out "buy" or better opinions, compared to four "holds" and two "strong sells." Plus, AAPL's average 12-month price target of $131 stands at a 21% premium to current levels -- and rests in annual-high territory. So, not only could the shares face pressure as bullish options traders unwind, they could also be hit by potential downgrades and/or price-target cuts.

One potential catalyst for a move lower could be weak holiday sales. From the looks of it, Apple may not be off to a hot start, as we head into the homestretch of 2016. In a note to investors, Drexel Hamilton said AAPL's October sales build was more modest than usual, at 6% month-over-month. Meanwhile, supplier Hon Hai reported a historically weak 1% month-over-month sales increase, as did Pegatron, with sales actually declining 0.2% last month. However, the firm made sure to note that this came in the wake of September's strong numbers.

Last but not least, Apple Inc. (NASDAQ:AAPL) has failed to impress on the charts in recent weeks. Following its most recent highs north of $118 throughout mid-to-late October, the tech stock has tumbled nearly 9%. As a result, the shares have underperformed the broader S&P 500 Index (SPX) by nearly 11 percentage points in the past month.

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