{"id":11195,"date":"2012-04-24T23:35:25","date_gmt":"2012-04-25T03:35:25","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=11195"},"modified":"2012-04-24T23:35:25","modified_gmt":"2012-04-25T03:35:25","slug":"the-odds-favor-big-upside-from-apples-fiscal-2012-second-quarter-earnings","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2012\/04\/24\/the-odds-favor-big-upside-from-apples-fiscal-2012-second-quarter-earnings\/","title":{"rendered":"The Odds Favor Big Upside from Apple&#8217;s Fiscal 2012 Second Quarter Earnings"},"content":{"rendered":"<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on April 23, 2012. <a href=\"http:\/\/seekingalpha.com\/article\/517291-odds-favor-a-big-one-day-upside-after-apple-posts-earnings\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n<p>If recent history has any relevance to the upcoming (and much anticipated) earnings announcement on April 24th from Apple (AAPL), odds favor a very positive reaction the following day. <\/p>\n<p>I generally prefer to ascertain the best <strong>response<\/strong> to a post-earnings reaction since the news is known at that time &#8211; for example, see post-earnings strategies for <a href=\"http:\/\/seekingalpha.com\/article\/344611-why-amazon-com-was-a-buy-at-the-open-after-reporting-earnings\" target=\"_blank\">Amazon.com<\/a> and <a href=\"http:\/\/seekingalpha.com\/article\/456611-how-to-assess-best-buy-s-post-earnings-potential\" target=\"_blank\">Best Buy<\/a> (click the links). However, in AAPL&#8217;s case, the strong and persistent selling ahead of earnings caught my attention. I simply could not recall such obvious negativity ahead of any recent AAPL earnings report.<\/p>\n<p>It turns out that this selling is indeed the worst in recent years. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_11198\" aria-describedby=\"caption-attachment-11198\" style=\"width: 483px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekPreEarningsPerf.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekPreEarningsPerf.jpg\" alt=\"Apple&#039;s Average Daily Price Change During the Two Weeks Prior to Earnings Since 2007\" title=\"Apple&#039;s Average Daily Price Change During the Two Weeks Prior to Earnings Since 2007\" width=\"493\" height=\"411\" class=\"size-full wp-image-11198\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekPreEarningsPerf.jpg 493w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekPreEarningsPerf-300x250.jpg 300w\" sizes=\"auto, (max-width: 493px) 100vw, 493px\" \/><\/a><figcaption id=\"caption-attachment-11198\" class=\"wp-caption-text\">Apple&#039;s Average Daily Price Change During the Two Weeks Prior to Earnings Since 2007<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_11199\" aria-describedby=\"caption-attachment-11199\" style=\"width: 490px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120420_AAPL.png\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120420_AAPL.png\" alt=\"Apple is now testing critical support as pre-earnings selling accelerates\" title=\"Apple is now testing critical support as pre-earnings selling accelerates\" width=\"500\" height=\"350\" class=\"size-full wp-image-11199\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120420_AAPL.png 500w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120420_AAPL-300x210.png 300w\" sizes=\"auto, (max-width: 500px) 100vw, 500px\" \/><\/a><figcaption id=\"caption-attachment-11199\" class=\"wp-caption-text\">Apple is now testing critical support as pre-earnings selling accelerates<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>It almost seems obvious that a large segment of traders and investors are dreading Apple&#8217;s coming earnings report and want to get out of the way ahead of time. Ironically, this same negativity is likely creating a buying opportunity and paving the way for a post-earnings rally. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_11202\" aria-describedby=\"caption-attachment-11202\" style=\"width: 433px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLPostEarningsDistributions.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLPostEarningsDistributions.jpg\" alt=\"Distribution of One-Day Price Changes After Apple Reports Earnings (Jan, 2007 to Jan, 2012)\" title=\"Distribution of One-Day Price Changes After Apple Reports Earnings (Jan, 2007 to Jan, 2012)\" width=\"443\" height=\"378\" class=\"size-full wp-image-11202\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLPostEarningsDistributions.jpg 443w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLPostEarningsDistributions-300x255.jpg 300w\" sizes=\"auto, (max-width: 443px) 100vw, 443px\" \/><\/a><figcaption id=\"caption-attachment-11202\" class=\"wp-caption-text\">Distribution of One-Day Price Changes After Apple Reports Earnings (Jan, 2007 to Jan, 2012)<\/figcaption><\/figure><br \/>\n<\/center><\/p>\n<p>{snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_11205\" aria-describedby=\"caption-attachment-11205\" style=\"width: 468px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLUpVsDownPostEarnings.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLUpVsDownPostEarnings.jpg\" alt=\"Number of Positive Versus Negative One-Day Reactions to Apple&#039;s Earnings By Month of the Year (Since 2007)\" title=\"Number of Positive Versus Negative One-Day Reactions to Apple&#039;s Earnings By Month of the Year (Since 2007)\" width=\"478\" height=\"407\" class=\"size-full wp-image-11205\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLUpVsDownPostEarnings.jpg 478w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPLUpVsDownPostEarnings-300x255.jpg 300w\" sizes=\"auto, (max-width: 478px) 100vw, 478px\" \/><\/a><figcaption id=\"caption-attachment-11205\" class=\"wp-caption-text\">Number of Positive Versus Negative One-Day Reactions to Apple&#039;s Earnings By Month of the Year (Since 2007)<\/figcaption><\/figure><br \/>\n<\/center><br \/>\n{snip}<\/p>\n<p>Now it seems like these data are sufficient to get the pre-earnings bullish juices flowing. Surprisingly, the &#8220;fun with numbers&#8221; does not end here. It turns out that AAPL&#8217;s one-day post-earnings performance is, fortuitously, inversely correlated with the stock&#8217;s 2-week pre-earnings performance as measured by the average daily price change. This inverse relationship has been getting <strong>stronger<\/strong> in recent earnings cycles. {snip}<\/p>\n<p><center><br \/>\n<figure id=\"attachment_11211\" aria-describedby=\"caption-attachment-11211\" style=\"width: 484px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekCorrelations.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekCorrelations.jpg\" alt=\"Correlation of Apple&#039;s 2-Week Average Daily Pre-Earnings Price Change to the One-Day Post-Earnings Price Change\" title=\"Correlation of Apple&#039;s 2-Week Average Daily Pre-Earnings Price Change to the One-Day Post-Earnings Price Change\" width=\"494\" height=\"363\" class=\"size-full wp-image-11211\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekCorrelations.jpg 494w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL2WeekCorrelations-300x220.jpg 300w\" sizes=\"auto, (max-width: 494px) 100vw, 494px\" \/><\/a><figcaption id=\"caption-attachment-11211\" class=\"wp-caption-text\">Correlation of Apple&#039;s 2-Week Average Daily Pre-Earnings Price Change to the One-Day Post-Earnings Price Change<\/figcaption><\/figure><br \/>\n<\/center><br \/>\n{snip}<\/p>\n<p>The inverse correlation with Apple&#8217;s 1-week average daily price change is relatively strong but nowhere near the convincing pattern created by the 2-week average daily price change. The correlation between the day before and the day after earnings is particularly uninformative.<\/p>\n<p><center><br \/>\n<figure id=\"attachment_11212\" aria-describedby=\"caption-attachment-11212\" style=\"width: 477px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1WeekCorrelations.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1WeekCorrelations.jpg\" alt=\"Correlation of Apple&#039;s 1-Week Average Daily Pre-Earnings Price Change to the One-Day Post-Earnings Price Change\" title=\"Correlation of Apple&#039;s 1-Week Average Daily Pre-Earnings Price Change to the One-Day Post-Earnings Price Change\" width=\"487\" height=\"362\" class=\"size-full wp-image-11212\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1WeekCorrelations.jpg 487w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1WeekCorrelations-300x222.jpg 300w\" sizes=\"auto, (max-width: 487px) 100vw, 487px\" \/><\/a><figcaption id=\"caption-attachment-11212\" class=\"wp-caption-text\">Correlation of Apple&#039;s 1-Week Average Daily Pre-Earnings Price Change to the One-Day Post-Earnings Price Change<\/figcaption><\/figure><br \/>\n<br \/>\n<figure id=\"attachment_11213\" aria-describedby=\"caption-attachment-11213\" style=\"width: 488px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1DayCorrelations.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1DayCorrelations.jpg\" alt=\"Correlation of Apple&#039;s 1-Day Pre-Earnings Price Change to the One-Day Post-Earnings Price Change\" title=\"Correlation of Apple&#039;s 1-Day Pre-Earnings Price Change to the One-Day Post-Earnings Price Change\" width=\"498\" height=\"367\" class=\"size-full wp-image-11213\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1DayCorrelations.jpg 498w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_AAPL1DayCorrelations-300x221.jpg 300w\" sizes=\"auto, (max-width: 498px) 100vw, 498px\" \/><\/a><figcaption id=\"caption-attachment-11213\" class=\"wp-caption-text\">Correlation of Apple&#039;s 1-Day Pre-Earnings Price Change to the One-Day Post-Earnings Price Change<\/figcaption><\/figure><br \/>\n<strong>Data sources for all bar charts: Earnings dates from briefing.com; AAPL stock prices from Yahoo! Finance<\/strong><br \/>\n<\/center><\/p>\n<p>I am guessing that since Apple&#8217;s stock is dominated by institutional investors and traders, event-driven trades must play out over many days ahead of the event. {snip}<\/p>\n<p>So, putting it all together, odds strongly favor a positive reaction to Apple&#8217;s earnings on April 24th. The current selling is likely a buying opportunity. {snip}<\/p>\n<p>StockTwits provides a heatmap that definitively confirms how closely investors and traders are watching Apple and discussing Apple. {snip}<\/p>\n<p><em><strong>Click for larger image&#8230;<\/strong><\/em><br \/>\n<center><br \/>\n<figure id=\"attachment_11214\" aria-describedby=\"caption-attachment-11214\" style=\"width: 290px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMap.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMap-300x216.jpg\" alt=\"StockTwits topic heat map over the last 24 hours (as of 4\/23\/12)\" title=\"StockTwits topic heat map over the last 24 hours (as of 4\/23\/12)\" width=\"300\" height=\"216\" class=\"size-medium wp-image-11214\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMap-300x216.jpg 300w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMap.jpg 977w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-11214\" class=\"wp-caption-text\">StockTwits topic heat map over the last 24 hours (as of 4\/23\/12)<\/figcaption><\/figure><br \/>\n<br \/>\n<figure id=\"attachment_11215\" aria-describedby=\"caption-attachment-11215\" style=\"width: 290px\" class=\"wp-caption aligncenter\"><a href=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMapTech.jpg\"><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMapTech-300x216.jpg\" alt=\"StockTwits topic heat map for technology stocks over the last 24 hours (as of 4\/23\/12)\" title=\"StockTwits topic heat map for technology stocks over the last 24 hours (as of 4\/23\/12)\" width=\"300\" height=\"216\" class=\"size-medium wp-image-11215\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMapTech-300x216.jpg 300w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2012\/04\/120423_StockTwitsHeatMapTech.jpg 979w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/a><figcaption id=\"caption-attachment-11215\" class=\"wp-caption-text\">StockTwits topic heat map for technology stocks over the last 24 hours (as of 4\/23\/12)<\/figcaption><\/figure><br \/>\n<strong><a href=\"stocktwits.com\/signals\/heatmap\" target=\"_blank\">Source: StockTwits heatmap<\/a><\/strong><br \/>\n<\/center><\/p>\n<p>Be careful out there!<\/p>\n<p><strong>(This is an excerpt from an article I originally published on Seeking Alpha on April 23, 2012. <a href=\"http:\/\/seekingalpha.com\/article\/517291-odds-favor-a-big-one-day-upside-after-apple-posts-earnings\" target=\"_blank\">Click here to read the entire piece<\/a>.)<\/strong><\/p>\n<p>Full disclosure: long AAPL call spread<\/p>\n","protected":false},"excerpt":{"rendered":"<p>(This is an excerpt from an article I originally published on Seeking Alpha on April 23, 2012. Click here to read the entire piece.) If recent history has any relevance to the upcoming (and much anticipated) earnings announcement on April 24th from Apple (AAPL), odds favor a very positive reaction the following day. I generally &#8230; <a title=\"The Odds Favor Big Upside from Apple&#8217;s Fiscal 2012 Second Quarter Earnings\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/04\/24\/the-odds-favor-big-upside-from-apples-fiscal-2012-second-quarter-earnings\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[220,219,62,1],"tags":[250,534],"class_list":["post-11195","post","type-post","status-publish","format-standard","hentry","category-earnings","category-high-tech","category-technical-analysis","category-uncategorized","tag-aapl","tag-apple-inc"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.4 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Odds Favor Big Upside from Apple&#039;s Fiscal 2012 Second Quarter Earnings - ONE-TWENTY TWO: Trading Financial Markets<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/drduru.com\/onetwentytwo\/2012\/04\/24\/the-odds-favor-big-upside-from-apples-fiscal-2012-second-quarter-earnings\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Odds Favor Big Upside from Apple&#039;s Fiscal 2012 Second Quarter Earnings - ONE-TWENTY TWO: Trading Financial Markets\" \/>\n<meta property=\"og:description\" content=\"(This is an excerpt from an article I originally published on Seeking Alpha on April 23, 2012. Click here to read the entire piece.) If recent history has any relevance to the upcoming (and much anticipated) earnings announcement on April 24th from Apple (AAPL), odds favor a very positive reaction the following day. I generally ... 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