This is how I play Apple now

The history of the apple

Let me start by stating that I maintain a long position on Apple (AAPL). Let me add that this position corresponds to about a third of the size of there is a little more than a week. The catalyst for this downsizing was not the firm's performance, nor the undeniable increase in the situation facing the firm in the face of the trade war between the United States and China. In simple terms, the shares failed at the very significant technical level of $ 215 between the middle and the end of August. I always believe in the name. I always love where the CEO, Tim Cook, thinks he's taking the firm. Jim Cramer often states that home gamers should probably own AAPL, and not exchange it. I consider myself both a trader and an investor. Therefore, I am guilty of trading this name while maintaining a central position. I will add the recently sold shares. I must understand where and when. That's my story.

Save a little

Let's go back to July 30th. Apple reports the company's financial results for the third quarter of the same day. Apple has exceeded expectations in terms of revenue and revenue. The company has increased its own revenue forecast for the fourth quarter, above the consensus, while pushing them back halfway to gross margin as well. Reasons for optimism? What about the fact that the very fashionable business services businesses are growing like weeds in the garden in the late summer? Apple Care. Apple Music. Cloud Services. The App Store. Advertisement. 420 million paid subscriptions. What about China? Clearly, no boycott in sight. The region generated revenues of $ 9.2 billion. Wearables? Growth of 50% for Apple Watch, for AirPods.

Even with the iPhone, which has slightly underperformed, Apple still offers what consumers want and has a huge, almost captive customer base on which these products can be marketed. The company recently talked about $ 6 billion spent by the company to implement the new streaming service that will compete with Amazon (AMZN) Prime, Netflix (NFLX), and Disney (DIS) Plus and Hulu ( also a Disney product). To keep this in perspective, the company ended the quarter with net cash of more than $ 102 billion and continues to aggressively return capital to shareholders.

Commercial war !!

The new rates put in place by the Trump administration this weekend are more consumer-oriented than the previous installments already in effect. Of the approximately $ 110 billion currently taxed, approximately $ 52 billion will be placed in consumer electronics such as televisions, cameras, headphones, smartwatches, and more. This is where Apple faces some pressure on its margins because the AirPod and Apple Watches already mentioned is a high growth sector for the company.

As for the iPhone, it's a more complex story. President Trump has pushed back a number of tariff proposals until December 15th. Smartphones are on this list. The president said he understood that Apple had to compete with Samsung (SSNLF) in this area. The president has also expressed interest in companies whose major supply chains are highly exposed to China, move these supply lines elsewhere, and in the United States, even with the expected pressures on them. margins. DRAM, NAND) for their mobile devices. The bottom line? Longbow analyst, Shawn Harrison, estimates this morning that September 1 tariffs could have an annual negative impact on EPS of the order of $ 0.19 to $ 0.20 if it is not necessary. There is no price increase on the consumer side.

Do not forget that while Apple runs assembly sites in the United States, Brazil, and India, the company remains heavily exposed to China in this regard.

iPhone 11

September 10th. In a week, Apple plans to unveil the next iteration of the firm's smartphone series. It's here that the Pro and Pro Max versions will be launched. Do you need an iPhone? I still treat an iPhone so old, I do not even know what number it is and how long I have this phone. It still works, but I am due. I bet a lot of you are due too. I also know that I do not leave Apple when I bite. Improve? Yes, I have one (or more) of those ready. About 60 million Chinese consumers and more are also in this situation. Their loyalty to the brand could be a problem. Until now, this demand seems to have stabilized.

Table

Here, we clearly understand why a failure at $ 215 was so important from a technical point of view. My point of panic for the name is currently $ 188. This level, a 61.8% retracement from the peak after earnings since the August low, must be maintained. It happened a month ago. I think maybe I'll add $ 201, and then the position is down to $ 195.

It's just a plan. Everyone has a plan until the blows fly. In the meantime, a trader could (in minimal lots) …

– Buy a $ 205 AAPL call on October 18th for about $ 8.70 … and pay this expense through the …

– Sale of an October 18 sold $ 200 for about $ 6.50 and the …

– Sale of an October 18 put $ 195 set for about $ 4.90.

Net credit: $ 2.70

Note: In this example, the trader earns $ 270 in exchange for an increased risk on his equity at the levels of $ 200 and $ 195, while offering greater flexibility to increase exposure when the stock enjoy from the announcement of the iPhone.

(Apple, Amazon and Disney are stakes in Jim Cramer's Action Alerts PLUS member club.) Do you want to be alerted before Jim Cramer buys or sells AAPL, AMZN or DIS? Learn more now.)