Our preferred measure of medium-term momentum appears to have bottomed for $AAPL the week ended July 8. This gauge looks slated to improve through September. Importantly though, momentum’s signal for share price strength into the Fall will remain of low conviction unless can $AAPL close north of $97.25 this week. Nonetheless, the exhaustion of downside momentum should alert investors of the potential for a reversal of the weakness that has dominated price action so far this year.
Zooming out a bit, longer-term momentum too appears to be in the process of forging a bottom, also supporting the idea that further downside might be limited (though this gauge likewise offers only a muffled indication at present). Taken together, these readings hint that $AAPL’s roughly year-long corrective period may have ended at the May 2016 low of $89.47. Accordingly, we are closing out our bearish predilection toward the name.
Our waning bearishness should not be interpreted as bullishness. In order for our neutral view to morph into outright optimism, we would want to see earnings estimate revisions improve. At present, estimates are currently still being revised lower for the current quarter, next quarter, the current year and next year.
Separately, an indication from our monthly model that the momentum curve for the name is likely pierce the zero bound would also foster increased longer-term enthusiasm.
The company is expected report earnings after the close on July 26th. A calendar 2Q beat could indeed catalyze positive earnings estimate revisions and share price gains ($AAPL’s soft 1Q release shattered an 11 quarter string of beats). While we have often found our short term momentum work to offer insight into how the herd might react to coming news, we can glean no clear indication in this case–while daily momentum appears set to worsen materially into the first week of August, our hourly gauge appears slated for an imminent rebound.
As such, and absent 1) signals of fundamental improvement and 2) a more definitive turnaround in investor psychology, we are content to upgrade our outlook from outright bearish to neutral for now.