PreMarket Prep Stock Of The Day: Apple

Benzinga's PreMarket Prep airs every morning from 8-9:00 a.m. EST. During that fast-paced highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to a recording, Benzinga will highlight a stock of the day that was featured on the show.

Stock Of The Day: Apple

Up to this point, the U.S. markets have mostly ignored the potential negative long-term implications of the coronavirus. While the major cruise lines have understandably sagged in response to quarantines, an issue such as Nike NKE is actually trading higher ($100.54 vs. $103) than it was on the day after it announced the virus will "have a significant material impact on our operations in Greater China."

Apple Succumbs To Virus Concerns, Issues Lower Guidance

On Monday afternoon, while U.S. stock indexes were closed in observance of Presidents' Day, Apple Inc. AAPL said it doesn't expect to meet its second-quarter forecast for revenue.

Understandably, the news instigated a lower open at the 6 p.m. EST open for stock index futures. Also, the news caused a sharp decline in shares at the commencement of Tuesday's pre-market trading at 4 a.m. EST. In fact, it swooned from Friday's close of $324.95 all the way to $310.06 before rebounding.

Investors Not Falling For This Profit Warning

On Jan. 2, 2019, Apple lowered its guidance, citing weaker-than-expected iPhone sales and a weakening economy in China. The following day it swooned from the previous day's close of $157.92 to $142.19 and that just happened to be the low for the entire year. Investors that sold on that day missed out on the issue's spectacular rally as it ended the year at $293.65, which continued in 2020 reaching $327.85 on Jan. 29.

Although the issue is in the red in today's session, it's well off its pre-market low as it found support off the open just above last Monday's low ($313.63), only reaching $314.61. It has grinded higher and rebounded to $316.78 as of 12:30 p.m. EST.

Why This Time May Be Different

Amid the 2019 warning, which cited the same concerns as Monday's warning, the issue was in the midst of an extended decline. After peaking in October 2018 at $233.47, investor sentiment soured on Apple, mainly attributed to its heavy reliance on the iPhone for a large portion of its profits.

However, the technical scenario around the issue is the polar opposite this time around. Instead of the issue being in the midst of an extended decline, the issue is coming off its best six-month rally perhaps in history.

After ending September at $223.97, the issue is higher by 42%, as opposed to its 37% decline from October to December in 2018.