What To Expect From Apple's Stock After This Week's Big Drop

• Apple Inc. AAPL’s stock fell by more than 3.0 percent on Tuesday following a report of reduced iPhone component orders.
• A one-day decline of this size is a relatively common occurrence for Apple.
• Data shows that the stock has typically generated positive returns in the 10 days following a one-day drop of this magnitude.
 

Apple’s stock was down more than 3.0 percent on Tuesday after the release of a Credit Suisse report that claims that Apple has reduced its iPhone components orders by as much as 10 percent. A 3.0 percent drop in one day is a major move for a stock with as large of a market cap as Apple, the world’s largest public company.

How rare is a drop this large and how has the stock traded in the past following such a large one-day decline? Here’s a look at what traders can expect over the next 10 days.

A common occurrence
It turns out that for such a large company, Apple’s stock experiences relatively large one-day declines of 3.0 percent or more on a fairly regular basis. In fact, Apple has registered one-day drops of more than 3.0 percent no less than 31 times in the last four years.

The next 10 days
The good news for Apple shareholders is that the stock tends to stabilize following these large down moves and has even demonstrated some bounce-back. Of the 31 times it has dropped 3.0 percent or more in the past four years, it has averaged a 10-day return of 0.67 percent following the drop and has booked positive 10-day gains 21 out of the 31 times.

AAPL data by Market Memory

Longer-term outlook
A 3.0 percent one-day drop has happened about eight times per year for Apple over the past four years, and the stock has returned an overall gain of 113.3 percent during that time. While any potential weakness in Apple’s iPhone cash cow is certainly troubling for shareholders, the one-day decline in itself is nothing to be concerned about.

Apple followed up Tuesday’s big drop with a modest 0.5 percent decline in Wednesday’s session.
 

Disclosure: the author holds no position in the stocks mentioned.