How to Trade Apple Stock Before the July 22 Earnings Report

NEW YORK (TheStreet) -- It was nice to start the week with shares of Apple (AAPL) up $1.23. That's another $1.23 of separation from our momentum sell point at $94.50, which means our overweight Economic Timing portfolio allocation is justified. (Shares were gaining more ground early in Tuesday's session, up 6 cents at $96.49.

It seems there are one or two analysts every day who upgrade their price target on the stock to $110. Monday it was Morgan Stanley and Barclays.

The more the merrier. With Wall Street fixated on $110, perception is destined to become reality as Apple's iPhone 6 rolls out this fall.

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The important question to ask at this juncture is whether we should sell ahead of the July 22 earnings report. The most relevant historical data to use to answer the question are the four recent earnings reports since Apple began its rally in April 2013. Here's the analysis:

  1. On July 24, 2013 Apple shares rose $3 to $61.44 and then rose another $10 by Aug. 19.
  2. On Oct. 29, 2013 Apple shares dropped $1.85 to $72.54 and recovered to $74 by Nov. 14.
  3. On Jan. 28, 2014 Apple shares dropped $6.20 to $71.53 and recovered to $77 by Feb. 13.
  4. On April 24, 2014 Apple shares rose $6.10 to $80.66 and then rose another $10 by May 29.

Of these previous four earnings reports AAPL recovered or surpassed its pre-earnings high within three weeks of the event. In two of the four events, Apple generated gains of more than $10 one month after the earnings report.

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