2 Dow Stocks Brushing Off Bearish Brokerage Notes

AAPL put options prices imploded during the stock's recent retreat

Karee Venema
Jan 31, 2018 at 12:49 PM
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The Dow is shaking off its two-day slump on a positive earnings reaction for Boeing (BA). The broad-market tailwinds have shares of iPhone parent Apple Inc. (NASDAQ:AAPL) and industrial conglomerate General Electric Company (NYSE:GE) trading higher, even after both blue chips received bearish brokerage notes. Here's a quick roundup of how shares of AAPL and GE are performing today.

Apple Stock Put Options Cheap Ahead of Earnings

Ahead of tomorrow night's earnings report, Apple was downgraded to "market perform" from "outperform" at BMO. The brokerage firm also slashed its price target to $162 from $199, saying selling prices for its devices is likely to plateau and projecting flat year-over-year growth in China.

Nevertheless, the stock was last seen trading up 0.5% at $167.85. More broadly, a string of recent Apple downgrades had the shares retreating from their Jan. 18 record high of $180.10. However, the pullback was contained yesterday by familiar support atop the equity's 120-day moving average, and AAPL is still boasting a nearly 38% year-over-year gain.

In spite of the stock's recent technical troubles, puts are pricing in unusually low volatility expectations relative to calls. Apple stock's 30-day implied volatility skew of negative 0.9% ranks in the 1st annual percentile.

Deutsche Bank Thinks GE Could Be Booted from the Dow

Deutsche Bank said it thinks the chances that General Electric could end its 110-year run as a member of the Dow Jones Industrial Average are improving, considering "GE continues to face substantial challenges." Off the charts, the industrial conglomerate recently announced it was being investigated by the Securities and Exchange (SEC) over a massive writedown for its insurance business -- which sparked breakup talk from CEO John Flannery.

On the charts, the Dow stock is pacing for its 11th straight monthly loss -- even with today's 1.4% gain that has GE stock trading at $16.17 -- its longest such losing streak since at least 1973, according to Schaeffer's Senior Quantitative Analyst Rocky White. Plus, General Electric has shed nearly 46% over the course of this streak, and is currently the worst Dow stock of 2018. And if history is any guide, the stock's struggles could worsen if it gets booted from the Dow.

Short sellers, meanwhile, have ramped up their exposure recently -- which has likely created more headwinds for GE. In the two most recent reporting periods, short interest on General Electric stock jumped 25.4% to 141.51 million shares. This represents just 1.6% of the equity's exposure, meaning the bearish bandwagon is far from full.


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