McClellan Chart in Focus: AAPL’s Quarterly Price Pattern “Seeing AAPL’s share price make a big jump after a quarterly earnings announcement is not unusual..” By Tom McClellan

 

Chart In FocusWe normally think of seasonality as being an annual phenomenon.  But it can appear in other ways, such as the 4-year Presidential Cycle Pattern, and quarterly, as with this week’s chart of the share price of Apple Corp (Nasdaq:AAPL).

The price of AAPL stock got everyone excited on August 1st after the company announced strong earnings.  Prices shot up to a new high, and the company’s market capitalization shot up above $1 trillion.  It is the first U.S. company to reach that threshold, and you know how the media love a big round number.

Seeing AAPL’s share price make a big jump after a quarterly earnings announcement is not unusual.  In fact, it has become the standard behavior over the last few quarters.  In this week’s chart, I have chopped up the price history of AAPL into quarterly chunks, the better to see how each quarter tends to see a fairly consistent and characteristic pattern.

Out of the past 6 quarters, the one which stands out as being dramatically different is the first quarter of 2018, which I have highlighted in that chart.  It did not see a big positive price response to AAPL’s Feb. 1 earnings announcement because AAPL got caught up in the overall market minicrash which was unfolding then.  That threw AAPL’s price pattern for a loop, at least for a little while, but then it got back into the groove of the normal pattern during the rest of that quarter.

To see this typical behavior better, the lower chart shows the last 6 quarters’ price behavior averaged together.  The principle is the same as what we use for the Annual Seasonal Pattern or the Presidential Cycle Pattern.  Each period’s price values are reset to reflect a percentage change since the beginning of the period, the better to ensure each has the same weight.  Then the patterns are averaged together.

AAPL Qtrly Pattern

So far, Q3 is following the script pretty closely.  There is an initial peak, equating to Aug. 14, and another topping period equating to the first week of September.  After that second top, the normal pattern transitions into the month of corrective behavior before it all starts again.

AAPL is a very strong stock, and I own some as a core long term holding.  The time to worry will be when the price starts violating this pattern, for example if prices run up into the date of the earnings announcement instead of pausing.  That would be an indication that the players have figured out the game, and thus that the game is about to change.  There is no sign of that recognition just yet.

Tom McClellan
Editor, The McClellan Market Report

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About the author

Sherman and Marian's son Tom McClellan has done extensive analytical spreadsheet development for the stock and commodities markets, including the synthesizing of the four-year Presidential Cycle Pattern. He has fine tuned the rules for interrelationships between financial markets to provide leading indications for important market and economic data. Tom is a graduate of the U.S. Military Academy at West Point where he studied aerospace engineering, and he served as an Army helicopter pilot for 11 years. He began his own study of market technical analysis while still in the Army, and discovered ways to expand the use of his parents' indicators to forecast future market turning points. Tom views the movements of prices in the financial market through the eyes of an engineer, which allows him to focus on what the data really say rather than interpreting events according to the same "conventional wisdom" used by other analysts. In 1993, he left the Army to join his father in pursuing a new career doing this type of analysis. Tom and Sherman spent the next 2 years refining their analysis techniques and laying groundwork. In April 1995 they launched their newsletter, The McClellan Market Report, an 8 page report covering the stock, bond, and gold markets, which is published twice a month. They utilize the unique indicators they have developed to present their view of the market's structure as well as their forecasts for future trend direction and the timing of turning points. A Daily Edition was added in February 1998 to give subscribers daily updates on their indicators and also provide market position indications for stocks, bonds and gold. Their subscribers range from individual investors to professional fund managers. Tom serves as editor of both publications, and runs the newsletter business from its location in Lakewood, WA.