Active-Trader - Seasonality and AAPL

Welcome back Active Traders and Wealth Builders.

Recall from last week's post Crapple no more, we went into the weekend long AAPL shares and call contracts, and short the put 505/500 put credit spread. We took profits on both option positions but held onto the shares.  Not only that, we added to the position.  Was this a good idea?

When it comes to investing and trading, I often shoot first and ask questions later.  That's because the price action itself is a leading indicator, but there are other factors at play.  What other factors?  Seasonality of course. So I set off on a seasonality study in AAPL to answer these questions:

- Are there specific season patterns in AAPL stock price?
- Does AAPL rally more at certain times of the year versus others?
- What about seasonal sell-off described in my prior post Evidence of Autumn?  Based on that, isn't this a bad time of year to be long AAPL stock?

First a brief history lesson on AAPL stock. APPL came public back on December 12, 1980 at a split adjusted price of $3.60 per share.  With today's close at around $500 per share, that's about 16.7% annualized return, not bad by any measure.  But it has not always been a straight up ride since the stock was under $10 per share back in 2002 when it was basically rescued by a cash-infusion from rival Microsoft. Calculating the rate of return from that low, the rate of return was just under 47% per year.

Back to our seasonality study, to the right find the average weekly YTD returns for APPL shares for the 32 years they have been publicly traded.  The chart bears some resemblance to the overall market returns described in my post Evidence of Autumn with these key differences:

- Average annual return for AAPL was nearly 35.5% versus about 7.5% for the Dow Jones Industrials

- The Dow has its autumn sell-off between weeks 35 and 43 and gave back about 24% of its year to date gain in that 8 week period

- AAPL has its autumn sell-off between weeks 37 and 40 and gave back about 18% of its gain in that 3 week period

- From week 40 through the end of the year, AAPL makes 45% of its annual gain while the Dow makes 29% of its annual gain in that same exact time period.

To summarize, the autumn sell-off in AAPL shares occurs about 2 weeks later than the general market and ends 3 weeks sooner.  Not only that, the sell-off is more shallow in duration that the rest of the market.  Once the sell-off is complete, AAPL continues on to make the bulk of its annual gain between weeks 40 and 52 and gains much more than the general market on average.

Based on all that, I will stay long AAPL shares for the time being.

Enjoy your weekend.