Traders Weighing Critical Questions Ahead Of Apple Earnings

Apple Inc. AAPL reports third-quarter earnings after the close Thursday afternoon. Based on the stock’s 7-percent gain over the past five days, investor expectations are high. But with roughly 24 hours left for traders to take a position in Apple, the million-dollar question is if expectations a little bit too high.

Production Confusion

Apple stock initially looked like it might limp into earnings season after selling off hard on Oct. 19. The stock dropped from around $160 to $156 on reports from 9to5mac.com that an Apple supplier had said iPhone 8 production was cut in half.

Clearly the report spooked investors, but Loup Ventures analyst Gene Munster says Apple routinely manipulates supplier orders.

“They typically will tell suppliers a much bigger number than they will ever produce. So we don’t know what that initial number was, so every time in this cycle we will hear about production cuts, but we never hear about the production expansion because it’s a new product that’s coming out so … it’s just a starting point,” Munster said. “I think I would be pretty skeptical when you hear the phrase production cuts but put a lot of weight, whether good or bad, into some of their key suppliers in terms of what they’re specifically saying.”

Levels To Watch

Apple hit a new all-time high this week ahead of earnings, and the stock is now up 44.6 percent year to date. With question marks surrounding iPhone mix and demand, traders should be asking themselves how large of a beat it would take to get Apple to new highs and where that earnings upside may have come from in Q3.

At the $170 level, almost all Apple investors are sitting on big gains, and may be itching to lock in profits if the stock moves higher on earnings.

If it moves in the other direction, near-term technical support levels are the August high of around $165, the mid-October low of around $155 and the September low of around $150.

Joel Elconin contributed to this story.

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