For the better part of three years, Apple
(NASDAQ:AAPL) was the NASDAQ-100’s
(INDEXNASDAQ:NDX) savior, delivering expanding revenues and earnings quarter after quarter. Its ever-expanding percentage of that index, though recognized, never became an issue since the stock was almost always heading higher, and up is good when it comes to the market. For the past three plus months, that has changed; Apple is now a serious drag on the NDX’s performance, which can easily be seen in this comparison chart.
And it is the primary reason that the NDX lags the S&P 500 (
So, with earnings season upon us and with Apple being a drag rather than a push for the indexes, what can we expect when Apple reports earnings in a couple of weeks?
Technically Apple has shown multiple times that it is intent on building a base here from which it will likely trade higher, not lower. I say this because the supply and demand as viewed through the charts consistently shows that the buyers are more interested in buying at these levels than the sellers are in selling.
Above is the daily chart. Witness the volume drop off on each subsequent attempt to break the stock down to even lower levels. The same is true on the weekly time frame as shown below.
With earnings just around the corner, this is actually the best setup you could ask for
if you are an Apple bull. The past three earnings reports
have resulted in selloffs. The stock has lost 25% of its value over the past three months. Expectations are low and the willingness for money managers to accumulate into earnings is probably as low as it has been in years. The general markets are on the verge of a breakout in the S&P 500 and one has already happened in the small caps. Might it be that Apple will turn in great numbers and the stock propels forth, taking the indexes to new highs? I wouldn’t bet against that. In fact, although I do not like to trade in front of earnings, this is a darn good setup to do just that.
No positions in stocks mentioned.