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Tuesday, September 07, 2021
iPhone Launch: A Price Action Opportunity
*Trading in financial markets carries risk and can result in loss of capital
*This performance is only observed with historical backtests and not traded by the company
Holding cost is subject to change impacting the trade either negatively or positively.
Note: The objective of this report is to enable clients to make informed decisions around the Apple event. The probability and the returns in the above strategy have been formulated after studying the historical data for a particular number of years and is not a guarantee of future returns. Clients should follow proper risk management as huge volatility is expected around such events. The product and investment ideas do not consider the risk profile and financial position of the recipient and may not be suitable for everyone. Trading in financial markets and use of margin involves a significant risk of loss, which can exceed deposits. Please read the complete disclaimer carefully.
Apple holds multiple events in a year, but the iPhone launch event is often the showstopper. Along with the launch of a new iPhone, a new operating system, an iWatch and AirPods are introduced to the masses. Fans of the company await this time of the year as the $2.5 trillion company unveils exciting tech features and outlook.
As per historical data of the past 6 years, often the share price of AAPL has witnessed an upward movement in the week leading up to the event, reaping average returns of approximately 2.6%. Based on past data, it has been observed that immediately after the event, prices of AAPL tend to drop. Investors must be cautious when taking a position on the day of the event as volatility level are high.
The table below illustrates returns of the two scenarios where clients can enter into a long position on AAPL shares at the closing price 6 days prior to the launch event.
|Scenario 1||Scenario 2|
|Exit one day before Launch||Exit on Launch Day|
The returns of scenario 1 are calculated based on an exit at the closing price one day prior to the launch event. The hit ratio for the past 6 years is 67%. In the past the trade has generated an average return of 3.04%.
The returns of scenario 2 are calculated based on an exit at the closing price on the day of the launch event. The hit ratio for the past 6 years is 67%. In the past the trade has generated an average return of 2.26%.
The iPhone launch event for 2021 is scheduled to be on 14th September 2021.
Entry for September 2021 Price action: Closing Price at 7th Sept 2021
Exit: Scenario 1 Exit Date: Closing Price at 13th Sept 2021.
Scenario 2 Exit Date: Closing Price at 14th Sept 2021.
Risks and Assumptions for Back-tested trading strategies
Data Source: Bloomberg
Data & Prices as of: 07/09/2021
Arun Leslie John
Chief Market Analyst
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