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Apple Stock: Massive One-Day Recovery, Now What?

Apple stock’s impressive intraday rally on Monday was rare, but quite telling of what may happen next. Here is what investors should know.

Apple stock  (AAPL) - Get Apple Inc. Report has been on the move — blink and you will miss it. On January 24, shares of the Cupertino company rallied strongly after reaching a 2022 intraday low of less than $155. A bit over three hours later, AAPL stock sat a whopping 4.5% higher.

Today, I put in context the dizzying rally witnessed this past Monday. I then debate what the recent price action might mean for Apple stock only a couple of days ahead of the company’s highly anticipated earnings day.

Figure 1: Apple Stock: Massive One-Day Recovery, Now What?

Figure 1: Apple Stock: Massive One-Day Recovery, Now What?

(Read more from the Apple Maven: Apple Stock: A Better Deal Now, But Is It A Buy?)

AAPL’s unique spike

Apple stock’s vicious intraday rallies, at least to the extent seen on Monday, are quite rare.

Over the past 5 years, AAPL has climbed 4.5% or more from intraday low to the end of the trading session only 18 times. This is an average of only once every three months — although half of them happened during the very short COVID-19 bear period of February to April 2020.

The last time that something like it took place was in February 2021, nearly a year ago. Back then, the global semiconductor shortage had caused investors to worry about the stock, pushing share price into a 12% drawdown from the previous peak.

Monday’s price action was not only rare, but unique in its own way. This 4.5%-plus intraday jolt higher happened during a time of relatively low volatility: 22% annualized, measured by one standard deviation over the trailing 30 days. In the other 17 times when similar single-day rallies happened since 2017, the median annualized volatility was a much higher 51%.

What this means

Large swings in prices during the trading day are often a glimpse of optimism amid a general bearish environment. This is obvious by the fact that they tend to happen when volatility is at a high and share price is off its historical peak.

As a word of caution, here is what Monday’s rally does not guarantee: that Apple stock will skyrocket from here. In fact, I would not be surprised at all to see AAPL return to the $150s before it can climb higher and reach the $3 trillion market cap milestone once again.

A cautious stance is even better justified by two important events scheduled to happen this week. First, the Federal Reserve will meet for the first time in 2022 to discuss monetary policy on Tuesday and Wednesday. Second, Apple’s earnings report will come out on Thursday. AAPL stock could react to either or both events, maybe unfavorably.

But, at least, there’s one reason to be optimistic. In the past 5 years, AAPL’s median three-month return has been 9%. However, if considering only the days when Apple stock rallied by 4.5% or more intraday, the forward three-month gains have been a much better 17%.

This is to say that half a day of bullish action in AAPL may not mean much in the short term. But if history repeats itself, there is a good chance that Apple investors will be in a much better place a few months down the road, if they can only be patient for now.

Twitter speaks

In the afternoon of January 24, Apple stock zipped higher: from less than $155 per share around lunch time to nearly $162 by the closing bell. Is the 2022 selloff over?

(Disclaimers: this is not investment advice. The author may be long one or more stocks mentioned in this report. Also, the article may contain affiliate links. These partnerships do not influence editorial content. Thanks for supporting the Apple Maven)