PreMarket Prep Stock Of The Day: Apple

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. 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 the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

This is the first full week of trading action for Apple Inc. AAPL since it split four-for-one and what a week it was. The volatile price action was discussed on today’s show making it the PreMarket Prep Stock Of The Day.

Big Q3 Beat And Split: On July 30, Apple announced during its fiscal third-quarter earnings that the Board of Directors approved a four-for-one stock split. That meant, for each share of Apple stock that an investor owns, they'll receive three additional shares.

The primary reason companies do this is to make their shares more affordable to the average retail customer.

Monster Pre-Split Rally: The day of the announcement, Apple closed at $96.19 (when adjusting for the split). The price action from the news was reflected in the following day's session when it leaped to $106.26 and the rally was just getting started.

Over the next few sessions, it moved relentlessly higher and ended last week just off its new all-time high at $124.81.

What Was Supposed To Happen: Roughly 80% of stocks that have a massive rally into a stock-split show some weakness following the split. With those expectations, many short sellers may have gone into the split on Monday, either short or willing to aggressively short the issue.

What Happened: In a euphoric bull market, anything can happen. On Monday, the issue opened at a new all-time high (just under $3 higher from Friday’s close) and ended the session $4 higher at $129.04. The torrid rally did not find a top until Wednesday off the open at $137.98, which was $13 higher than last Friday’s close at $124.81. Apple did back off that day to end the session at $131.40.

Then The Hammer Came Down: With the technology sector leading the way on the downside, the market cratered and Apple was sliced. On its worse day since March 20, the issue declined from $131.40 to $120.88.

The avalanche continued this morning as the issue cascaded to $110.89, but has since rebounded with the market to the $118 area.

Moving Forward: Now that Apple has returned to the prescribed post-split trading action, it's hard to determine when the issue will fully stabilize and rebound or if a long-term top has been put in place.

Certainly, parameters to follow that will dictate its next move will be Friday’s low ($110.89), which corresponds to a series of six consecutive lows in that area from August 5-12.

On the upside, both pre-split and post-split owners of the issue should focus on the adjusted split close from Friday ($124.81), which just so happens to be just above the intraday high from today’s session ($123.70) as of 12:30 p.m. ET.

The full discussion on the issue from today’s show can be found here: