DailyPlay – Opening Trade (AAPL) – January 30, 2024

AAPL Bearish Opening Trade Signal

Investment Rationale

We have taken a neutral to bearish stance on AAPL for 3 Earnings cycles already, and the upcoming one this week is no exception. The fundamentals are decoupled from reality and the relative performance of the stock tells us everything that we need to know. AAPL simply cannot keep up with its sector and continues to be distributed by investors. Perhaps an end of an era at least for now, for what has been a bulletproof stock for investors over the past 15 years. 

Technical Analysis

After failing twice at its $200 major resistance level, it recently mustered a rally up into its $195 range and once again failed as tech rallies higher. However, the most important chart that tells us everything we need to know going into earnings is the relative performance to its sector. AAPL just printed a two-year low relative to its sector, showing how much it has fallen out of season and favor with investors. This is concerning, as we are going into an important Earnings this Thursday and does not set up for a breakout, but more likely a breakdown. 

AAPL – Daily

Fundamental Analysis

The fundamentals look even worse, trading at roughly 27-28x forward earnings, AAPL is expensive considering it is only expected to grow revenues by 4% and EPS by 8% over the next fiscal year. This is a 40% premium relative to the market while expecting growth rates roughly in line with the market. AAPL’s walled garden which has forged its dominance is starting to create rifts within the tech sector. 

AAPL Trade Details

Strategy Details

Strategy: Long Put Vertical Spread

Direction: Bearish Debit Spread

Details: Buy to Open 7 Contracts March 15th $190/$180 Put Vertical Spreads @ $2.86 Debit per contract.

Total Risk: This trade has a max risk of $2,002 (7 Contracts x $286) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $286 to select the # contracts for your portfolio.

Counter Trend Signal: This is a bearish trade on a stock that is currently bullish but overbought.

1M/6M Trends: Bullish/Bullish

Relative Strength: 4/10

OptionsPlay Score: 132

Stop Loss: @ $1.43 Credit. (50% loss of premium paid)

View AAPL Trade

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

View AAPL Trade