Why Apple goes up in the summer and down in winter

June 27, 2011, 4:09 PM UTC

There’s a seasonality to the company’s share price. So beware those January 2012 calls.

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With the usual caveat that past performance is no guarantee of anything, two recent reports have uncovered interesting patterns in Apple’s (AAPL) share price.

Two weeks ago on Seeking Alpha, Jason Schwarz documented a weekly cycle of Monday lows and Thursday highs. Over the past 32 weeks, he reports, Apple’s share price has fallen from Friday to Monday 16 times and climbed from Monday’s low to a Thursday high 27 times. Schwarz, who runs a newsletter called the Economic Weather Station ($30/mos.), has started betting his own money on the Monday-Thursday Apple cycle.

Meanwhile, Bullish Cross‘s Andy Zaky, who recently put his website behind a paywall ($40/mos.), has discovered an even deeper pattern.

Nearly every year for the past eight (the exception being the collapse of 2008), there’s been a major rally in Apple that starts in July or August and runs to January or February.

Then, every year for the past eight, the run-up has been followed by a correction that begins in January (6 times) or February (2 times) and by late spring or summer has shaved between 12% and 43% off Apple’s share price.

There are good reasons for this pattern.

The first and second quarters (Apple’s second and third fiscal quarters) are traditionally slow ones for the company. The action tends to pick up mid-year with the developers conference in June, the release (except for this year) of a new iPhone in June-July, and the September introduction of a crop of new products in time for the big holiday selling season. Exacerbating the mid-winter doldrums in two of the past three years has been the announcement in January that Steve Jobs was taking a medical leave.

Zaky makes some specific predictions about where he thinks Apple’s share price is headed. But he spends much of his report trying to answer the questions he gets every day from investors who have bet that Apple’s share price will go up from its current lows by buying January 2012 calls (including more than 11,000 January 400s that will expire worthless on January 19, 2012 if Apple is trading below $400).

He warns that although Apple is, in his words, “dirt cheap and firing on all cylinders,” the market’s perception of what he calls the “macro environment” is actually more important than the company’s fundamentals.

His summary of the factors involved in that perception — from the European debt crisis to what the Fed decides to do about QE2, which is scheduled to expire this week — is a cogent as any I have read and well worth the price of admission.

So what about all those investors holding January 400 calls?

“The most likely scenario,” he writes, “is a solid break above $400 to a high of $420 a share, then a manipulated pull-back to $400 at expiration to wipe out $400 call-holders. That scenario wouldn’t surprise me at all. We’ll get into the different strategies one can employ to maximize their chances of restoring significant lost value as a result of the first-half woes. Stay tuned for more.”

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