Big caps lag behind “meme stock” in 2021
Cryptocurrency and the so-called shares “meme” have been in vogue for the past few months. However, while crypto as well as Reddit News headlines known to FAANG shares such as Apple Inc (NASDAQ: AAPL), Alphabet Inc (NASDAQ: GOOGL), as well as Netflix Inc (NASDAQ: NFLX)have watched their own notable market moves. In particular, right now the market is flooded with large-cap companies, which have actually dropped since the beginning of the year (YTD). Today, the focus is on the AAPL, which has lost 6% since the start of the year as of Friday. The last time from the start of the year to June, by June, stocks fell so hard in 2016.
The main takeaway that seems odd to me is that meme stocks seem to be growing by about 10% per day, on average every day. This comes at a time when established, larger-cap companies – the titans of their industry who ultimately support the fundamentals of the market – are struggling and losing ground since the beginning of the year.
For example, Apple has spent very little time in positive territory this year, according to the chart below. This suggests that there is a major weakness in the market and that “fast money” has moved from cryptocurrency to small-cap meme stocks. However, it remains to be determined if investors will rekindle their love for the big-cap tech names that have lifted the market out of the Covid-19 quarantine.
Regardless of AAPL’s next move, stock options were kind of insane. The stock has just appeared on the list of Schaeffer’s senior quantitative analyst Rocky White that has attracted the most options in the last 10 days. According to White, 1,417,825 calls and 659,470 puts were exchanged. The two most popular contracts during this time period were the 127 week 5/28 strike and the May 130 call.
It now seems like a good opportunity to weigh the next move of Apple stock versus options. The Schaeffer’s Securities Volatility Index (SVI), at 23%, is in the 15th percentile of the annual range, indicating that options players currently value expectations for low volatility. Finally, the Volatility Score (SVS) of Schaeffer’s securities is ranked 83 out of 100, which means that the stock tends to exceed these volatility expectations – a boon for option buyers.
Aside from Apple’s own technical customization, the way it lags behind the more dynamic 2021 names reflects a broader rotation of tech names. Whether this relationship between Reddit favorites and tech heavyweights like AAPL will keep its seemingly opposite nature, investors will be interested to watch in the second half of 2021.
Bernie Schaeffer’s followers Schedule of the week received this comment on Sunday 6th June.