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March 27, 2019 | Every Uptick Only Makes Apple Shares a Juicier Short

Rick Ackerman

Rick Ackerman is the editor of Rick’s Picks, an online service geared to traders of stocks, options, index futures and commodities. His detailed trading strategies have appeared since the early 1990s in Black Box Forecasts, a newsletter he founded that originally was geared to professional option traders. Barron’s once labeled him an “intrepid trader” in a headline that alluded to his key role in solving a notorious pill-tampering case. He received a $200,000 reward when a conviction resulted, and the story was retold on TV’s FBI: The Untold Story. His professional background includes 12 years as a market maker in the pits of the Pacific Coast Exchange, three as an investigator with renowned San Francisco private eye Hal Lipset, seven as a reporter and newspaper editor, three as a columnist for the Sunday San Francisco Examiner, and two decades as a contributor to publications ranging from Barron’s to The Antiquarian Bookman to Fleet Street Letter and Utne Reader.

Every uptick in AAPL only makes the stock a juicier short because iPhone, the main source of the Cupertino company’s revenues, has significant problems. Sales have softened in the U.S. and China, Apple’s second-largest market, and the firm faces increasing competition from the likes of Huawei, which can undersell the top-of-the-line iPhone by more than 30%. Add to the list of negatives the implications of a story played prominently in Tuesday’s edition of The Wall Street Journal: ‘Apple Extends Push Into New Territory’.  It turns out that the ‘new territory’ includes some of the most competitive businesses of the digital age: entertainment, financial services, news and video games.  From a standing start, is it possible for Apple to go head to head in showbiz against such established players as Netflix, Disney, Amazon, HBO et al. and expect to carve out a commanding share? It would take nothing less than that to produce the kind of margins the company has enjoyed selling overpriced hardware.

Apple may have inadvertently highlighted the weakness of its johnny-come-lately move into ‘original programming’ by featuring Oprah Winfrey at a recent event to announce their strategic shift. There is already such a glut of excellent shows offered via subscription across various video devices, including television, that it’s hard to imagine Apple getting a leg up on the competition. Even the early winners are certain to face problems because they’ve bid up the price of Hollywood talent into the ionosphere. To give you some idea, Netflix paid comedian Chris Rock $40 million to do two 60-minute specials. The company’s bean counters may think they’ve figured out a way to make money on this bet, but it still seems like an extravagant gamble.

Apple’s PR Machine

For now, Apple’s capable PR machine has given the stock an undeserved boost to a recent high of 197. The sharp run-up from late December’s bombed-out low at 142 was abetted by the hacks who fabricate the news. These guys were in Apple’s face with ‘bad press’ just a couple of months ago when the stock was falling; now that it is rising — for purely cyclical reasons —  all they can see is blue skies.

AAPL’s damn-the-torpedoes rally comes with no guarantees the stock can’t tack on another 10% before reversing and heading south with a vengeance. If it does, we will be adding to short positions with low-risk, high-leverage option spreads. Want to get in on the fun? Click here for a free two-week trial subscription that will give you access to all paid features and services of Rick’s Picks, including daily, actionable trading recommendations and a ringside seat in a 24/7 chat room that draws veteran traders from around the world.

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March 27th, 2019

Posted In: Rick's Picks

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