Question 1: When is it a better time to buy Apple stock - after a drop or after a rise?Answer:Consider two situations,Case 1: Apple stock drops by -5% or more in a monthCase 2: Apple stock rises by 5% or more in a month
AAPL stock fares better after Case 2, with a 59.4% chance of rise over the next month (21 trading days) under Case 1 (where the stock has suffered a 5% loss over the previous month), versus, a 65.3% chance of rise for Case 2. This would suggest that it is better to buy AAPL stock after a recent rise
Try the Trefis machine learning engine to see for yourself how Apple stock is likely to behave after any specific gain or loss over a period.
Question 2: Does Apple stock have a higher chance of rise after a steeper drop?Answer:Trefis machine learning engine's calculations show that for most stocks, the chance of rise reduces as the drop gets steeper. However, after unusually high drops of -10% or more, there is usually an improvement in the chance of rise. This makes sense intuitively, as markets often overreact to bad news around a company
For AAPL stock, the probability of positive returns over the next month (21 trading days) after a drop of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:
Previous 21 days% DropNext 21 daysPositive Return ProbabilityAAPL S&P 500-1%60.4%71.1%-3%59.6%73.0%-5%59.4%72.7%-7.5%52.8%78.3%-10%55.1%78.4%
Question 3: What about Apple stock chance of rise after a recent rally?
Answer:AAPL's probability of positive returns over the next month (21 trading days) after a gain of N% over the last 21 trading days is detailed in the table below, along with the positive return probability for the S&P500:
Previous 21 days% RiseNext 21 daysPositive Return ProbabilityAAPL S&P 500+1%63.6%67.8%+3%64.3%68.5%+5%65.3%67.0%+7.5%65.2%68.4%+10%68.4%74.2%