Apple share price analysis for April

As people stay at home they may rely more on phones and streaming services

0'>Apple shares have consolidated after experiencing a sharp 35 per cent decline from peak to trough. The company is scheduled to release Q2 fiscal earnings on May 5, 2020. The average analyst estimate for the ESP is $2.23 for the quarter. The reported EPS for the same quarter last year was $2.46.

The number does not appear that concerning, looking at prior year on year earnings, despite Apple stores in China closing for most of the quarter. In early March, Apple closed its retail stores around the globe but reopened stores in China in late March. As the “shelter in place” stays on, people may rely more on their phones, which bodes well for Apple. Additionally, strong use of its streaming service Apple+ should keep the share price stable.

Apple volatility is elevated

The share price will likely remain volatile, as implied volatility on the shares remains elevated. The Apple VIX, which is calculated by the Chicago Board of Options Exchange, is hovering near the 65 per cent level. It means that options traders believe that 0'>Apple share price could rise or fall 65 per cent from current levels over the next 12-months.

The Apple VIX is similar to the S&P 500 VIX in that is calculated as the “at the money” strike prices for nearly Apple options. The level of 65 per cent compares to a high of 115 per cent in mid-March and a low of 25 per cent in mid-February. While the implied volatility level is well of the highs, 65 per cent is nearly triple the levels seen during the Q4 of 2019.

The seasonals

The seasonality of the performance of Apple shares is positive in April, despite reporting Q2 fiscal earnings which are usually the lowest of the year. Historically Apple shares were higher 65 per cent of the time in April, with an average gain of 3.1 per cent. This follows a March seasonal where shares are generally higher 70 per cent of the time (not 2020), with an average gain of 6.4 per cent.

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Apple technical analysis

0'>Apple shares have found support and are consolidating near the 50-week moving average which is short-term resistance near 241. Key support is seen near an upward sloping trend line near 228. Short term momentum is negative, as the fast stochastic tumbled, but the current reading of the fast stochastics is 19, below the oversold trigger level of 20 which could foreshadow a correction. Medium-term momentum is negative as the MACD (moving average convergence divergence) line recently generated a crossover sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices.

Apple analysis: the bottom line

Apple shares are within a range that is likely fair value. It's nearly impossible to gauge how well the company will do in the fiscal Q3 of April - June. People will likely rely on their phones as we remain in coronavirus isolation mode, keeping sales buoyed. Apple should also benefit from strong streaming sales with Apple+. Look for prices to hold support and then begin to rebound when traders see the light at the end of the tunnel.

Apple Inc
Daily change
Low: 145.61
High: 148.36

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