Trading Apple’s Upcoming “Event”

A few days ago, Apple officially announced its long-rumored mysterious “event” scheduled for September 9. What should Apple shareholders expect from this event?

Let’s start off by laying out what many Apple shareholders do expect from the event. The CNN article linked above states:

Multiple reports over the past few months have suggested that Apple plans to roll out two versions of an iPhone 6 this year, with screens that are 4.7 inches and 5.5 inches, when measured diagonally.

So two versions of the iPhone 6 with a larger screen option. Got it. Anything else?

But the “say more” tease prompted immediate speculation that new phones might not be all that’s on the agenda. The safest bet is that a long-anticipated “iWatch” smartwatch will be introduced as well.

Ah, so this must finally be the time that the fabled iWatch will be unleashed on the world. But what kind of demand is out there for a wearable device? Won’t the iWatch just be a tiny iPad with a wristband?

Not according to this guy:

Apple sold 19.5 million iPads in the first year on the market. However, the iWatch market is ultimately expected to be much bigger.

So the iWatch market will be bigger than the iPad market? This is setting up to be quite an event…

So what should Apple shareholders expect?

Wait, we’re not done with the new gadgets yet?

 Apple may also roll out a new version of its iPad Air.

Wow. OK, so now what should shareholders expect? As usual, Stocktwitters had no shortage of opinions:

Tweet1 Tweet2 Tweet3 Tweet4 Tweet5 Tweet6

I see. So everybody is expecting a run-up before the event. Got it. But is anybody worried that September 9 might be a “sell the news” type thing?

From Seeking Alpha:

The stock has done nothing but move up in the past month, but has a September 9th event which could be a “sell the news” event.

Macdailynews.com:

If the last six years of history have taught us anything it is that: AAPL is likely to decrease in the month after an iPhone launch [and] even if the stock is up for that time period, in the 2-3 weeks post-launch AAPL is unlikely to make a substantial move to the upside… for the last four launches, every time that Apple stock has increased pre-launch, the stock has tanked post-launch (an average drop of 8.8%).

According to The Street, Jon Najarian is on board:

Jon Najarian said that traditionally these types of events tend to be a “sell the news” trade and he believes that to be the case again. 

And Jon is easily the superior Najarian

And you can add me to the list of people who thought they had this trade all figured out at first. I thought that the extremely high expectations surrounding  this event, coupled with Apple’s history of post-event sell-offs, would certainly lead to a pre-event run-up in share price, followed by a post-event “sell on news.” The only problem has come over the past couple of days when I’ve read and heard this same theory over and over and over again. Apparently, everybody is going to sell on September 9 and buy back in after the inevitable drop. And apparently everyone is going to look like a genius.

There are two opposing forces at work here. One force is that, since so many people seem to be aware of the possibility of a “sell on news” event, the selling will be a self-fulfilling prophesy. Everyone expects it, so they will do it and it will happen.

But the other force at work is the idea that so many people seem to be expecting this sell-off that it could set the stock up nicely for a post-event short squeeze. That would catch many traders by surprise, which would only compound the effect of the squeeze.

So what’s a short-term Apple trader to do?

Good luck with that. I’m not a short-term trader. Apple stock is up 31% year-to-date, and my shares are up over 50% since I bought them early last year. Apple

If the run-up in Apple goes much higher, I will admit I will be tempted to sell, if for no other reason than because of how steep the incline has been on that chart lately. I expect the news to be good at the event, but it will be hard to come anywhere near the crazy expectations. If you are a long-term shareholder, the important thing to take away from this event will be the actual material news, not anything the stock does in the weeks following the event.

There’s too much attention on Apple right now, and when too many eyes are watching a stock, there tends to be much more noise than usual in the share price. The only piece of advice I can give is this: if this noise creates what you believe to be a buying opportunity, then buy. If this noise creates what you believe to be a selling opportunity, join me in selling. I don’t envy traders that are trying to guess on this one. As for me, I just prepare, plan, and react.

Want to know what the “sell the news” crowd is? Or maybe you want to learn if a “short squeeze” is as dirty as it sounds? Or maybe you just want to be able to look sophisticated in front of your coworkers when they ask you what you are reading on your Kindle, and you’d prefer to tell them “Oh, I’m just reading a book about stock market analysis,” rather than the usual “Oh, I’m just looking at pics of my ex-girlfriend on Facebook.” For these reasons and more, check out my book, Beating Wall Street with Common SenseI don’t have a degree in finance; I have a degree in neuroscience. You don’t have to predict what stocks will do if you can predict what traders will do and be one step ahead of them. I made a 400% return in the stock market over five years using only basic principles of psychology and common sense. Beating Wall Street with Common Sense is now available on Amazon, and tradingcommonsense.com is always available on your local internet!