For the first time in about a decade, Apple saw a decline in earnings. In the aftermath of this announcement, Apple dropped 3.0 percent almost immediately in afterhours trading. Once the new trading day officially began, the actual decline that Apple saw was a bit less—just 2.25 percent. Many analysts are extremely troubled by the fact that Apple saw this decline, but although it makes for great news stories, Apple’s drop should be seen not as a major failure, but rather as an opportunity for you to position yourself to create a profit.
There are a few ways to do this, but we will take a very general look at it. First, the panic of the news that Apple saw a decline was what led to the majority of its drop in price. Apple fell from $118 and change to a closing price of $115.59 on Wednesday, October 26th. This was the day after its earnings were announced. Yes, that’s a big drop. But the stock opened much lower on Wednesday, climbing up from a low of $113.31 over the course of the day. If you look at just one day’s worth of data, this was actually a very good day for the company.
The opportunity presented here was a great one for binary options traders. It was not actually a surprise that Apple fell in price. If you consider the fact that Apple performed better than expected when it came to earnings per shares, you would have realized that the afterhours selloff was not sustainable. It drove Apple’s price down too low compared to how strong the company actually is, and once this passed a certain point, an upward recovery was the most logical outcome. Because Apple is such a highly publicized company, and because it is often on the receiving end of undue criticism when it stumbles, it is very easy to follow the general waves of movement created by the general trading public. In many cases this can be profitable to you, but only if you are able to step back and observe with a well-trained eye. Trader psychology is a great tool to use for short term profits, but it also needs to give way to the fundamental data that is shown by a company. In this case, the selloff was completely expected, but because of Apple’s market dominance, it couldn’t have last long.
Apple historically does very well over the Christmas season, and not nearly as well the quarter before. The big tech purchases that many people want to make are often held back because of the fact that so many retailers discount Apple devices—even newer ones—at this time of the year. In this case, because the market has been so touchy over the last 12 months, it was only a matter of time before Apple saw a decline in profits. In fact, it’s kind of a surprise that it didn’t happen in either of the previous two quarters. But now that it has occurred, Apple will begin to show its dominance in the mobile tech business again.
The lesson here is a pretty easy one. Pay attention to the fundamental indicators, and whenever a news event—such as an earnings release—flies contrary to the fundamentals, there is potential for a disconnect between what the price is and what it should be. When these opportunities are found in the stock market or any other type of asset, binary options traders can move in for a series of short term trades until that price has settled back where it rightly should be.