Apple’s Holiday Gamble: Feast or Famine for Traders?
Editor’s note: Any and all references to time frames longer than one trading day are for purposes of market context only, and not recommendations of any holding time frame. Daily rebalancing ETFs are not meant to be held unmonitored for long periods. If you don’t have the resources, time or inclination to constantly monitor and manage your positions, leveraged and inverse ETFs are not for you.
Investing in the funds involves a high degree of risk. Unlike traditional ETFs, or even other leveraged and/or inverse ETFs, these leveraged and/or inverse single-stock ETFs track the price of a single stock rather than an index, eliminating the benefits of diversification. Leveraged and inverse ETFs pursue daily leveraged investment objectives, which means they are riskier than alternatives which do not use leverage. They seek daily goals and should not be expected to track the underlying stock’s performance over periods longer than one day. They are not suitable for all investors and should be utilized only by investors who understand leverage risk and who actively manage their investments. The Funds will lose money if the underlying stock’s performance is flat, and it is possible that the Bull Fund will lose money even if the underlying stock’s performance increases, and the Bear Fund will lose money even if the underlying stock’s performance decreases, over a period longer than a single day. Investing in the Funds is not equivalent to investing directly in AAPL.
Shares of Apple Inc. (Ticker: AAPL) have been stuck in a sideways trading range going back to July. The stock made it through a couple of earnings reports since then, and even managed to exceed expectations with their latest results on October 31st. The question now is whether bulls can seize the opportunity on this sideways price action, or if bears are setting the stage for a greater selloff.
Can Apple Continue to Shine?
For years, Apple has shown its resilience and kept up with innovation in a competitive tech landscape. Their latest earnings report showed growth not just in its core business of hardware, but also in its ever-increasing services sector.
Even with persistent economic uncertainty, Apple has maintained a strong performance driven by strong demand for products like the iPhone 15, in addition to growing its subscription services like Apple TV+, Apple Music, and iCloud.
In their most recent quarter, Apple had revenue of $89.6 billion, and net income of $22.7 billion, marking a slight year-over-year increase. The growth rate was modest compared to previous quarters, but the company’s ability to maintain profitability amid a challenging economy says a lot about its operational efficiency and diverse revenue streams.
Apple’s Services division, which includes the App Store, cloud services, and Apple Pay, accounted for $20.7 billion of this total. This remains an area of the business that continues to expand consistently, and provides the company with stable, recurring revenue.
Traders that think Apple can build on this foundation may find a trade with Direxion’s Daily AAPL Bull 2X Shares (Ticker: AAPU), which seeks daily investment results, before fees and expenses, of 200% of the performance of common shares of Apple Inc. (Ticker: AAPL).
Below is a daily chart of AAPL as of November 14, 2024.
Source: TradingView.com
Candlestick charts display the high and low (the stick) and the open and close price (the body) of a security for a specific period. If the body is filled, it means the close was lower than the open. If the body is empty, it means the close was higher than the open.
The performance data quoted represents past performance. Past performance does not guarantee future results.
Is the Worm about to Turn?
The Apple Watch and AirPods continue to show strength, but Apple is seeing less success in its legacy phone business as revenues fell in the wearables division last quarter. This is driving Apple’s strategy of shifting towards recurring revenue streams. The company has also made investments in augmented reality (AR), and the rumored launch of an AR headset could create new growth opportunities in the coming years, although their existing Vision Pro product has not seen as much success as anticipated.
Nonetheless, Apple's stock price still faces macroeconomic challenges, such as lower China demand, stubborn inflation,* supply chain disruptions, and tariff scares, which could weigh on consumer demand and margins.
Although the company has the scale to manage these risks, the potential for slower global growth remains a concern. If inflationary pressures persist or worsen, consumer spending on premium products like iPhones or Macs could slow, hitting Apple’s top-line growth. Traders would be wise to watch for the next inflation report on December 11. If it comes in hot, it could spell trouble for Apple.
In this situation, Direxion’s Daily AAPL Bear 1X Shares (Ticker: AAPD), which seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of common shares of Apple (Ticker: AAPL), could find a bid.
Additional Equity and Leveraged Sector Funds
Direxion offers traders innovative ways to make leveraged, sector-based plays, as well as offering additional individual equity plays aside from Apple. These include stocks like Microsoft Corporation, Meta Platforms Inc., Nvidia Corporation, Amazon.com, Inc., Tesla, Inc., and more. Investing in the Funds is not equivalent to investing in the underlying stocks.
Traders looking to trade the tech sector with leverage may be interested in the Direxion Daily Technology Bull 3X Shares (Ticker: TECL) and the Direxion Daily Technology Bear 3X Shares (Ticker: TECS). These funds seek daily investment results, before fees and expenses, of 300%, or 300% of the inverse (or opposite), respectively, of the performance of the Technology Select Sector Index*.
For those seeking additional single stock ETFs, there is the Direxion Daily MSFT Bull 2X Shares (Ticker: MSFU), which seeks daily investment results, before fees and expenses, of 200% of the performance of Microsoft Corporation common stock, and the Direxion Daily MSFT Bear 1X Shares (Ticker: MSFD), which seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of Microsoft Corporation common stock.
The Direxion Daily META Bull 2X Shares (Ticker: METU) seeks daily investment results, before fees and expenses, of 200% of the performance of Meta Platforms, Inc. common stock, while the Direxion Daily META Bear 1X Shares (Ticker: METD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Meta Platforms, Inc. common stock.
The Direxion Daily NVDA Bull 2X Shares (Ticker: NVDU) seeks daily investment results, before fees and expenses, of 200% of the performance of NVIDIA Corporation common stock, while the Direxion Daily NVDA Bear 1X Shares (Ticker: NVDD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of NVIDIA Corporation common stock.
The Direxion Daily AMZN Bull 2X Shares (Ticker: AMZU) seeks daily investment results, before fees and expenses, of 200% of the performance of Amazon.com, Inc. common stock, while the Direxion Daily AMZN Bear 1X Shares (Ticker: AMZD) seeks daily investment results, before fees and expenses, of 100% of the inverse (or opposite) of the performance of Amazon.com, Inc. common stock.
*Definitions and Index Descriptions
An investor should carefully consider a Fund’s investment objective, risks, charges, and expenses before investing. A Fund’s prospectus and summary prospectus contain this and other information about the Direxion Shares. To obtain a Fund’s prospectus and summary prospectus call 866-476-7523 or visit our website at direxion.com. A Fund’s prospectus and summary prospectus should be read carefully before investing.
The Funds have derived all disclosures contained in this document regarding Apple Inc. from publicly available documents. In connection with the offering of each Fund’s securities, neither the Funds, the Trust, nor the Adviser or any of its respective affiliates has participated in the preparation of such documents. Neither the Funds, the Trust nor the Adviser or any of its respective affiliates makes any representation that such publicly available documents or any other publicly available information regarding Apple Inc. is accurate or complete. Furthermore, the Funds cannot give any assurance that all events occurring prior to the date hereof (including events that would affect the accuracy or completeness of the publicly available documents described above) that would affect the trading price of Apple Inc. have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning Apple Inc. could affect the value of a Fund’s investments with respect to Apple Inc. and therefore the value of the Funds.
The Technology Select Sector Index (IXTTR) is provided by S&P Dow Jones Indices and includes domestic companies from the technology sector which includes the following industries: computers and peripherals; software; diversified telecommunications services; communications equipment; semiconductors and semi-conductor equipment; internet software and services; IT services; electronic equipment, instruments and components; wireless telecommunication services; and office electronics. One cannot invest directly in an index.
Direxion Shares Risks – An investment in a Fund involves risk, including the possible loss of principal. Each Fund is non-diversified and includes risks associated with a Fund concentrating its investments in a particular security, industry, sector, or geographic region which can result in increased volatility. A Fund’s investments in derivatives such as futures contracts and swaps may pose risks in addition to, and greater than, those associated with directly investing in securities or other investments, including imperfect correlations with underlying investments or the Fund’s other portfolio holdings, higher price volatility and lack of availability. As a result, the value of an investment in a Fund may change quickly and without warning.
Leverage Risk – The Bull Fund obtains investment exposure in excess of its net assets by utilizing leverage and may lose more money in market conditions that are adverse to its investment objective than a fund that does not utilize leverage. A total loss may occur in a single day. Leverage will also have the effect of magnifying any differences in the Fund’s correlation with AAPL and may increase the volatility of the Bull Fund.
Daily Correlation Risk – A number of factors may affect the Bull Fund’s ability to achieve a high degree of correlation with AAPL and therefore achieve its daily leveraged investment objective. The Bull Fund’s exposure to AAPL is impacted by AAPL’s movement. Because of this, it is unlikely that the Bull Fund will be perfectly exposed to AAPL at the end of each day. The possibility of the Bull Fund being materially over- or under-exposed to AAPL increases on days when AAPL is volatile near the close of the trading day.
Daily Inverse Correlation Risk – A number of factors may affect the Bear Fund’s ability to achieve a high degree of inverse correlation with AAPL and therefore achieve its daily inverse investment objective. The Bear Fund’s exposure to AAPL is impacted by AAPL’s movement. Because of this, it is unlikely that the Bear Fund will be perfectly exposed to AAPL at the end of each day. The possibility of the Bear Fund being materially over- or under-exposed to AAPL increases on days when AAPL is volatile near the close of the trading day.
Technology Sector Risk — The market prices of technology-related securities tend to exhibit a greater degree of market risk and sharp price fluctuations than other types of securities. These securities may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices.
Apple Inc. Investing Risk — In addition to the risks associated with companies in the technology sector, Apple Inc. faces risks related to market conditions, market disruptions, competition, managing the frequent introductions and transitions of products and services; as well as the outsourced manufacturing and logistical services provided by partners. Issuer-specific attributes may cause an investment held by a Fund to be more volatile than the market generally. The value of an individual security or particular type of security may be more volatile than the market as a whole and may perform differently from the value of the market as a whole.
Additional risks of each Fund include Effects of Compounding and Market Volatility Risk, Derivatives Risk, Counterparty Risk, Rebalancing Risk, Intra-Day Investment Risk, Industry Concentration Risk, Market Risk, Indirect Investment Risk, and Cash Transaction Risk. Additionally, for the Direxion Daily AAPL Bear 1X Shares, Shorting or Inverse Risk. Please see the summary and full prospectuses for a more complete description of these and other risks of a Fund.