Is There Excessive Bullishness on $AAPL?

The quick answer is no. But let’s break down the reasons this is so. The most common phrase now being used in conjunction with the upcoming September 9th AAPL event is “Buy the rumor, sell the news.” This has typically been the case for most AAPL events. But the question is whether this is too obvious a strategy.

Over the past couple weeks, and especially after AAPL crossed the $100 mark, everyone has been saying that they would buy AAPL on a pullback. But, is this going to be the pullback that never happens? Does that attitude (of waiting for a pullback) signal that AAPL is about to go on a big run?

When analyzing market sentiment over the last couple years, many people have been reluctant to buy the market, or for that matter, any stock on a breakout. Instead, people are fixated on buying on a pullback. For this reason, because the market has for the most part not had a significant pullback, there is so much cash on the sideline. And when stocks do pullback, people fear a crash is coming, and, therefore, are reluctant to buy on dips. This can only mean that the ‘big’ euphoric run for the market has not yet come.

So, to bring this discussion back to AAPL, the fact that many people are waiting for a pullback, and that analysts are saying everything is baked into the stock, I believe means that AAPL will go higher, much higher, over the next few months. Just look back to the WWDC conference last year when people were touting the idea of shorting AAPL right before the announcement. That trade worked for about 5 minutes, when AAPL briefly dipped, but then continued to go on its run upwards.

Many people have been fixated on the iPhone 6; I think that when it will be released, it will be considered the coolest product on the market. People looking to upgrade from their iPhone 4, 4s, or 5 will want this new phone, for its much improved battery and a better screen. There is no question that AAPL will sell-out the first weekend. I do not think that supply issues should worry investors, since AAPL seems to have anticipated this issue, having learned the hard way at the previous launch; this time they have ordered their suppliers to make over 70-80 million iPhones.

For this launch, let’s look at what the big money/institutional options traders have been trading over the last few weeks. If you were to pull up an options chain and to see what strikes have been bought over the last few weeks, you would have noticed that the most common strikes have been the September, October, and January strikes The open interest on the September 105s and 110s is tremendous. The October and January calls have also been going off the board, which signals that traders want to be in on the stock through year end. This tells me that they are not anticipating a sell-on-the-news event. However, for the next two weeks, it is very important to watch the action on the September 105 and 110 calls. If the open interest declines significantly, this will indicate that options traders in the September calls actually anticipate a sell-on-the-news event.

I am in AAPL for the long-term, so I am comforted by the fact that there has been a lot of buying in the October and January strikes. In addition, the September options activity will tell me how aggressively I should be selling premium on the week of the iPhone event. I think that for any long-term holder, it is key that he/she hedges his/her position, either by selling a call against a long position, or buying a put. I would rather sell a call, because I think the premiums will be inflated, and will most likely fall tremendously after the event.

In conclusion, I believe that if we get both iPhones announced (the 4.7 and 5.5 inch models) and a mention of the iWatch, there will be enough to keep the stock rallying for quite a bit of time.

Max Ganik (Maxzak) is a 19-year-old stock and option trader. As of June 2016, Max has been a member of Option Millionaires for over 3 years, and has been a contributor for over 2 years. Max regularly writes blogs for Option Millionaires and has also presented webinars.

Max is the founder of Ganik Market Strategies. He is a member of the Leaders Investment Club. Max has been interviewed by the New York Times, CNBC, and Bloomberg TV. He was also the first high school member of the New York Society of Security Analysts. Max is currently a member of the University of Michigan's premier investment club, Michigan Interactive Investments.

More Posts by Max: View All | See Max on CNBC

Leave a Reply