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On The Winter Solstice, AAPL Investors Hope The Darker Days Are Over

On the shortest day of the year, Apple stock showed timid signs of recovery. The Apple Maven debates whether shares are ripe for another rally, or if weakness will persist.

December 21 marked the winter solstice in the northern hemisphere — the longest night of the year. From here, investors hope that the days will also start to get brighter for Apple stock  (AAPL) - Get Apple Inc. Report, down since my “trim the position” warning but recovering a bit on Tuesday.

Could AAPL begin to bounce back from current levels, or will shares slide further before finally U-turning? The Apple Maven briefly looks at historical trends and catalysts ahead.

Figure 1: Apple Park in Cupertino, CA.

Figure 1: Apple Park in Cupertino, CA.

(Read more from the Apple Maven: Apple Stock: 3 Key Facts Dip Buyers Must Know)

Traditionally not the best time to own

I have said it repeatedly that AAPL is a good stock to hold for the long run, not to trade for short-term profits. But those paying attention to the month-to-month movements in share price, looking for good entry and exit points, might want to keep the following graph in mind.

Over the past decade, Apple stock has performed best during the summer months of July and August. Winter has not been great for shares of the Cupertino company, which have underperformed the S&P 500 in December and January by 1% per month, on average.

Figure 2: Average monthly return vs. S&P 500 (seasonality).

Figure 2: Average monthly return vs. S&P 500 (seasonality).

There is no way of knowing if history will repeat itself this year and in the early weeks of 2022. But so far in December, AAPL has behaved as it usually does, from a seasonality perspective. Maybe “winter is coming” for investors, although they hope that the worst has already been left behind.

Next likely catalysts

In my opinion, malaise in AAPL share price through the next several weeks, if confirmed, would be consistent with a couple of factors: (1) the stock rallied strongly in November and may need to take a break, and (2) catalysts may not come until late January at the earliest.

The first point was at the core of my “trim the position” stance on AAPL, issued early last week. Below was my main main observation:

“AAPL has topped the performance of the Nasdaq over a one-month period by the most since late August 2020: outperformance of +19.5%. [...] The stock rarely beats the benchmark over such a short period of time by as much as it has in the past 4 to 5 weeks.”

Therefore, the next catalyst for the stock (but not the company) might be a slight rerating that allows the broad market to catch up with AAPL a bit. This could be disappointing news for investors in the immediate term.

Regarding the second point above, the fiscal Q1 earnings report will probably come out on or around January 27 of next year. Apple is likely to drop the mic on iPhone 13 sales, although much of the strong numbers may already be baked into the share price.

I am much more excited about what comes next. Apple is widely expected to announce an Apple Glass later in 2022, which would mark the Cupertino company’s entry into the mixed reality and metaverse spaces. Because the market is thought to be a discounting mechanism, Apple stock could start to feel the updraft earlier, maybe as soon as calendar Q1 of 2022.

What to do

It goes without saying, it is impossible to know whether Apple stock will find a bottom at around $168-$170 per share or slide further before finally heading higher. I think that my trading plan presented a couple of days ago remains a good one:

  • Consider accumulating shares if Apple begins to underperform the Nasdaq by at least 5% going forward. This means buying at $160 per share and below, most likely.
  • “Back up the truck” if AAPL tanks — say, below $150. Keep in mind that Apple stock tends to offer the best one-year returns when bought after a selloff of at least 15%.
  • Be cautious accumulating, and possibly even rebalance out of AAPL a bit, if the stock U-turns and shoots through the $3 trillion mark. Be even more skeptical if this hypothetical rally happens without plenty of broad-market support.

Twitter speaks

We have recently asked Twitter: when is a good time to start accumulating AAPL on the dip? Feel free to chime in below!

(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)