Most technicians would agree that when viewing a chart of Apple Inc. stock there appears to be some “irregularities,” during some periods of time. Questionable trading activity can be seen both on the downside and the upside. On September 19th, the stock closed at $702.10, and a little over 3-months later on December 28th the equity fell to $509.58. A drop of 27.4% occurred with little news from the company and without any shocking developments about earnings, guidance or new product line development.
About two months ago, Apple jumped over 7% in one trading session. After closing at $527.68 on November 16th, the stock closed the very next day at $565.73, – a dramatic increase of $38.00. Another example is from the period of July 25 to September 21, when shares of Apple soared 24% or $135 in just 42 trading sessions. That type of performance effectively means that the stock averaged an increase of just over $3.20 per trading session for forty two consecutive days.
Some have argued that Apple’s stock performance leading up to the 2007 with the unveiling of the iPhone, made it a prime company for foment and manipulation. It is well-known that many media channels regurgitate the same misinformation in the market, which can easily cause a temporary panic-induced drop. Despite the news being completely untrue, someone can use these movements in the stock to profit handsomely.
Apple Inc. (NASDAQ:AAPL) is much easier to move compared to other companies with very little volatility such as Microsoft. Despite being in the same sector, Microsoft experienced a small difference in stock price since the 2000 bubble popped. More household names such as Procter & Gamble and Verizon are other examples of much more stable price movements.
These aforementioned companies simply do not have the type of ground breaking innovation that Apple is known for. They provide more stable products, and moving one of these stocks would be extremely difficult. In Apple’s case, an analyst or investor can simply say that they are hearing a rumor about “something” that “may” be happening in the near future. It could be based on complete speculation, but nevertheless will spur an initial move in the stock.
Investors who disregard the technical analysis and simply focus on the fundamentals may want to reevaluate their investment strategy. Technical analysis is a very important part of investing and the Apple (AAPL) chart supplies an abundance of useful information. When looking at the chart there were some movements that stuck out such as stacked buying for certain increments of time. When taking a closer look at intra-day moves and weekly options there seemed to be a constant occurring towards the end of trading, particularly some weird activity on Fridays.
On Fridays when weekly options are set to expire, many traders lose any potential gains as the equity value tends to move to get closer to the strike price for the week’s options. Lucky traders will be able to cash these securities in the money if given the chance and timed correctly, while others lose a substantial amount of principal. On these days there has been some erratic trading.
For example, on April 29th 2011, there was an extreme jump in trading in AAPL as more than 15 million shares changed hands and the stock dropped below the $350 strike price just before the closing bell (see chart below). The value of those calls disappeared almost instantaneously, while other puts were drastically put in the money. There are some that contend that fairly common hedging activity is the primary cause for the drifts in stock price. Other scientific reports have revealed that such stock price activity would not be accounted for by just hedging, and is thereby indicative of equity price manipulation, which by definition is illegal under United States securities law.
Apple Inc. (NASDAQ:AAPL)’s stock is vulnerable and can be easily moved due to its media exposure, popularity amongst all age demographics and the price of the stock. Most folks do not realize that the price of the stock is actually assisting in it being manipulated. Generally, a more expensive stock is more difficult to move due to how much capital it takes to do so. But with Apple, it’s different. About half of all trading in the stock generally takes place in very risky options that are set to expire at the end of the week. Apple stock option daily volume in weekly options was just over 90,000 contracts during the first three quarters of 2012.
Most investors want a piece of AAPL stock considering the current product line and the innovation that comes along with the name. Most retail investors cannot afford a $500 stock, or cannot buy enough shares to fill their appetite, so they turn to the options market. Most institutional investors are aware of this and are able to generate momentum in the stock, making it go significantly higher or lower. This allows the price to move quickly and trigger a lot of stops and scare day traders out of their position. Since options are so heavily traded with stop and limit orders, a select few are able to sway the stock and trigger these trades, causing abnormalities and spikes in the stock. It becomes what is known as a domino effect, and with Apple it is very easy to do.
The media has also tainted the credibility of the some of the equity movements in the stock. CNBC’s Jim Cramer was reported to have released an incorrect story following the iPhone’s launch that the company’s wireless partner Cingular, which was renamed AT&T at a later date) would supply a year and 6-months of free mobile service for the iPhone. The story was deemed completely false but was already picked up by blogs and widely publicized on various financial and syndicate sites like Digg. People began to question the report wondering why Cingular would give away $1440 of free service to at least ten million subscribers just to earn just $480 over two years. CNBC in general has been a basher of Apple Inc. (NASDAQ:AAPL), consistently pointing out how this may be the quarter when the company falters.
The Street’s Scott Moritz is also guilty of filing a very dubious report aimed at nailing Apple’s stock. The reported harped on the idea that Apple’s great launch weekend was a bust since the company was expecting to ship 1 million products within a few days, citing unanimous “whisper” sources. This story was deemed incorrect as the company does not release whisper numbers. The disbelief of the constant success and outperformance of the company has much of the media skeptical, especially folks at CNBC, who are always looking to poke holes in one of the most amazing corporate stories of a generation.
It appears that Apple Inc. (NASDAQ:AAPL) stock will continue to be manipulated until there are firm consequences put in place to stop people from driving the security up or down. Apple is a unique company and its stock carries a lot of euphoria that can be controlled with timely buying and momentum swings. These tactics in the end almost always benefit the large institutions and hurt the small retail investor.
Update 1/14/13 (4:54pm EST): Adding a link to an article today about Apple manipulation.
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