If you’re an active investor, you likely understand that participants are constantly attempting to price in what they know or believe they know about the market or a given security. The latter often leads to speculation – see Yahoo (YHOO) or Alibaba (BABA) – but the larger point here is that markets are forward looking. This logic was on display with the recent Apple (AAPL) product launch.
Please note that this example has more to do with near-term speculators than longer-term investors. This is merely a short-term snapshot of investor behavior through price action.
After watching the price action into and out of Apple’s announcement, I became concerned that the stock had already priced in what it knew (or thought it knew) about the new iPhone 6 and Apple Watch, at least to the extent any market can. In fact, I posted about it on See It Market.
Apple’s stock marched higher in the days leading up to the launch, recording new all-time highs on September 2… highs that have remained in place for over 3 weeks. Sure blame it on bendgate, but there’s something more at play.
Here’s an excerpt from that post:
Since a stock’s price provides insights into investor psychology, I think it’s worth pointing out a few reasons why the iPhone 6 and new Apple Watch are likely priced into the current stock price:
1)  AAPL traded as high $103.74 on September 2nd. This capped off a $10 run higher over a few weeks. The lead up to the AAPL announcement was filled with anticipation and information gathering as investors attempted to peg a value on the stock.
2) Â AAPL stock jumped over $103 on the announcement, but failed to top the September 2nd highs before immediately selling off (reversing lower).
3) Â AAPL closed the day near its opening price (down just $0.37). And the stock has subsequently drifted higher, back to the middle of that wide range today.
And for quick reference, below is one of the charts that I used from that post (updated with new candlesticks through today’s close):
Apple (AAPL) Daily Stock Chart
The takeaway: There is a significant amount of speculation heading into announcements and events. This type of speculation often breeds emotion, which can cloud short-term thinking. This is one reason that I try to avoid trading into big “events”. The excitement can be blinding and often inhibit your ability to properly interpret the price action.
This may well be a buying opportunity, but time is money for active investors and the stock has done little for over 3 weeks.
No position in any of the mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
