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TheStreet Open House

The Mechanics of Apple's Next Slingshot

Stocks in this article: AAPLGOOG

Raymond James analyst Travis McCourt is getting bullish on Apple, as Motley Fool reports, because of Apple's perfect position for the next big tech boom. We're also getting bullish on it.

At the October earnings report Apple performance will be compared to 40% gross margins and 26.9 million iPhone's sold. In January the numbers to beat are 38.6% gross margins and 47.8 million iPhone's. The introduction of a new lineup of iPhone's represents a critical tipping point for Apple because it sets the stage for a return to significant iPhone unit growth.

Not only will the new lineup appeal to global consumers looking for a 50% price cut on the iconic iPhone brand, but premium buyers are likely to take advantage of Apple's new trade-in program for the iWallet premium 5S model as well.

From a technical standpoint, Apple's current selloff has now outdone the famous Google (GOOG) dip of 2010 when GOOG shares bottomed at $436 in late June.

By November 2010, GOOG was back to $625; the same thing can happen to Apple. Two out of the three months August/September/October are poised to be $100 performers. Over the last 18 months, seven months have produced intramonth moves in excess of $80. Thirteen of the 18 months have produced intramonth moves in excess of $50. Needless to say, this stock has been extremely volatile, with six months of positive action and seven months of negative action out of the 13. Here is a rundown of the most volatile months of action:

June 2013 AAPL: -$64

April 2013 AAPL -$58

January 2013 AAPL -$120

December 2012 AAPL -$93

November 2012 AAPL -$98

October 2012 AAPL -$94

September 2012 AAPL -$50

September 2012 AAPL +$50

August 2012 AAPL +$86

April 2012 AAPL +$58

March 2012 AAPL +$104

February 2012 AAPL +$101

January 2012 AAPL +$62

The moral of the story is that Apple is capable of producing exaggerated moves in both directions. This is especially true in the first few months of a new trend as observed in February/March 2012 to the upside and October/November/December/January 2013 to the downside. Sentiment is certainly capable of changing; it has before and it will again. July 23 is the next tipping point.

At the time of publication, the author was long AAPL.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Jason Schwarz is an option strategist for Lone Peak Asset Management in Westlake Village, Calif. He is also the founder of the popular investment newsletter available at www.economictiming.com. Over the past few years, Schwarz has gained acclaim for his market calls on the price of oil, Bank of America, Apple, E*Trade, and his precision investing in S&P 500 option LEAPS. His book, The Alpha Hunter, is set to be released by McGraw Hill in December 2009.

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