Apple: Expecting Another Buy Opportunity Following iPad 3 Announcement

Mar. 6.12 | About: Apple Inc. (AAPL)

Now, this isn't a pronouncement on Apple's (NASDAQ:AAPL) fundamental value or how it might still be cheap and have a bright future ahead of it. This is about a pattern that emerges when Apple announces significant new products, as it will do on March 7 with the iPad 3.

Basically, after each significant announcement, there was always the chance to buy Apple stock cheaper than it closed on the day of the announcement over the 10 following sessions. And sometimes, the difference was substantial in percentage terms.

This is, in a way, to be expected. It's the so-called "buy the rumor, sell the news" reaction. And given Apple's outstanding performance as of late, the odds are significant that once again, the same will happen.

Over the last 7 significant events (iPhone, iPhone 3G, iPhone 3GS, iPhone 4, iPhone 4GS, iPad and iPad 2), the stock was lower 10 sessions after 4 out of 7 events, and in the three it wasn't lower, it still had significant corrections either on the day of the announcement, or in the 1-3 sessions after the announcement. So basically, after every announcement there was the chance to buy Apple stock anywhere from 2.8% to 15% cheaper compared to the price it closed at on the day of the announcement.

Below are the 7 announcements, together with a chart depicting what happened each time.

iPhone

The iPhone was announced on January 9 2007. The stock closed that session at $92.57, was at $86.70 10 sessions later (6.3% lower), and traded as low as $85.51 within those 10 sessions (7.6% lower).

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iPhone 3G

The iPhone 3G was announced on July 11 2008, it closed that session at $172.58, was at $162.12 10 sessions later (6.1% lower), and traded as low as $146.53 within those 10 sessions (15.1% lower).

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iPhone 3GS

The iPhone 3GS was announced on June 8 2009, it closed that session at $143.85, was at $139.48 10 sessions later (3% lower), and traded as low as $134.53 within those 10 sessions (6.5% lower).

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iPhone 4

The iPhone 4 was announced on June 7 2010, it closed that session at $249.33, was at $270.17 10 sessions later (8.4% higher), but traded as low as $242.20 within those 10 sessions (2.9% lower).

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iPhone 4S

The iPhone 4S was announced on October 4 2011, it closed that session at $372.50, was at $422.24 10 sessions later (13.4% higher), but traded as low as $354.24 within those 10 sessions (4.9% lower) - and this happened on the very session it was announced.

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iPad

The iPad was announced on March 12 2010, it closed that session at $226.60, was at $230.90 10 sessions later (1.9% higher), but traded as low as $220.25 within those 10 sessions (2.8% lower).

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iPad 2

The iPad 2 was announced on March 2 2011, it closed that session at $352.12, was at $330.01 10 sessions later (6.3% lower), but traded as low as $326.26 within those 10 sessions (7.3% lower).

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Conclusion

There's an obvious setup where you sell Apple on the day of the announcement and can buy it back lower within the 10 following sessions, with any luck maybe even in the same session. With the performance Apple had recently, this setup should work again, even if generically the iPad seems a lot less relevant for Apple than the iPhone.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.