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How to Invest in Apple After a Mixed Earnings Report

This article is more than 10 years old.

For years, investing in Apple’s (NASDAQ:AAPL) stock was easy: Buy some shares now, and wait to buy more shares in a pullback.

For good reason: Apple’s stock has been on an exponential trend—rising by leaps and bounds following phenomenal sales and earnings growth.

Yesterday’s mixed earnings report, in which Apple’s strong iPhone sales momentum was tempered by lackluster iPad sales, has raised questions about this trend—the stock is now trading below its 100-day moving average.

This has divided investors into two groups: The optimists, arguing that iPad sales will catch up with iPhone sales, and Apple’s stock will resume its ascend to new highs; and the pessimists, arguing that iPhone sales momentum will falter under both competitive pressures and a worldwide economic weakness -- sending the stock lower.

This divide among investors is reflected in the rising volatility in the price of the stock following the earnings report: A sharp dip below $600, shortly after the report came out on Wednesday afternoon, was followed by a snap back to $614 in early morning trade on the following day, before head back to low $590s by early afternoon.

What’s next? Will Apple’s stock continue its descent towards the $500 mark, resume its ascent towards the $700, or trade sideways for a while?

I believe it is the third of those. Apple stock will continue to trade sideways until there is better visibility, not about iPhone and iPad sales, but about the company’s pipeline.

Until then, the best strategy is to trade the stock on both sides of the market.

Also read:

Why Apple Will Lose the Tablet War

Is it Time to Sell Apple and Buy Microsoft?

Disclosure: Long and short on AAPL with options