Apple Inc. (AAPL) is a stock I trade often and that we cover often here on the T3Live blog. The company continues to innovate and achieve success in nearly every venture it undertakes, thanks in large part to visionary CEO Steve Jobs. Jobs has been plagued by ill-health over the last few years; this is his third health-related leave of absence. In the past he has battled pancreatic cancer and undergone a liver transplant, but the reason for his latest leave remains unclear at this time.
While AAPL has become a strong value and growth story for investors, the day Steve Jobs leaves his post has always been seen as a watershed event for the stock. Given the fact that Apple has the second largest market cap in the country and is a large component of the Nasdaq, some have speculated that news of his departure would trigger a sort of “Jobs crash”.
The selling in AAPL has been somewhat muted against what some may have expected, which is likely due to the unknown nature of Jobs latest leave. If he were to announce a clean break from the company the selling would surely intensify, so it is a fragile time for investors. The question I ask is, do Apple investors think Steve Jobs will live forever? While Jobs brilliance has certainly been an enormous part of Apple’s rise, at this point one man does not completely make a company, in my opinion. Investing based on an assumption that one man will be around forever is not a sound strategy. Apple has built enough brand equity that I think life after Jobs will not be as dismal as some think.
While investors may be apprehensive at this time, as an active trader I smell blood in the water. With a stock like AAPL, I am always looking for over-emotional opportunities to buy shares at a discounted price. This is an extreme example, but I think if you take a very quick, calculated approach to trading AAPL there could be tremendous opportunity.
The Strategy
This morning I was looking to see if the 20-day moving average holds during the first 30 minutes, which it did around the $332-333 area. You had to be quick to catch the move. To be honest, I would have rather, for trading purposes, seen AAPL break this area, but you can’t always get what you want. AAPL was strong off the bat and we’ve have gotten a great short term trade this morning as the stock has rallied more than 7 points already. We were all over it in the chat. I expect the AAPL trade to be volatile all day as everyone’s eyes are on it, and it could have already put in its top and bottom for the day.
Just before the close today, I will revisit AAPL in the chat to see if we have a compelling options strategy into earnings. I do not think Job’s announcement came as a coincidence today. By not divulging details about the nature or possible length of Jobs’ absence, the AAPL board is likely hoping to avoid a massive shock to the stock price. They are letting investors digest the possibility of a post-Jobs AAPL. Also, AAPL typically makes conservative earnings estimates and beats handily. I believe the company’s execs thought the blow Jobs’ leave would be softened by a stellar earnings report. We’ll see after the close today.
If this stock remains down enough around the close, we could look to buy some in the money calls for a trade. If selling persists and Jobs’ health continues to deteriorate, this could also be the moment for AAPL to finally consider a stock split. Either way, I will be watching AAPL close and look for quick trading opportunities to take advantage of the emotion surrounding the Jobs’ leave announcement.
*DISCLOSURE: No relevant position
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