Amid last week’s escalating tension between the U.S. and North Korea, the CBOE Volatility Index (VIX) — also dubbed the stock market’s “fear gauge” — made a relatively rare one-day surge of more than 40%. After we crunched the numbers on the best stocks to buy after VIX spikes, two Dow stocks (aside from Intel) caught our eye: tech titan Apple Inc. (NASDAQ:AAPL) and athletic apparel issue Nike Inc (NYSE:NKE). Below, we’ll take a look at blue chips AAPL and NKE, and how the shares could perform in the near term, if past is prologue.
Apple Stock Could Hit Record High
According to data from Schaeffer’s Senior Quantitative Analyst Rocky White, Apple stock is among the best-performing S&P 500 Index (SPX) members after a VIX pop of 40% or more. Going back to 2010, AAPL stock has been higher two weeks after a VIX surge 100% of the time, averaging a gain of 3.6%.
AAPL stock pulled back with the rest of the broader equities market last week, after touching an all-time high of $161.83 on Tuesday. However, the shares seem to have found support in the $155-$156 area — where they landed after an early August post-earnings bull gap, and an area that acted as a ceiling in May and June. At last check, Apple stock was up 1.6% at $159.99, and another 3.6% rally would place the shares at $165.75 — in record-high territory.
For traders expecting recent post-VIX history to repeat, Apple’s short-term options look attractive, from a historical volatility standpoint. The stock’s Schaeffer’s Volatility Scorecard (SVS) stands at a lofty 91, indicating AAPL shares have exceeded options traders’ volatility expectations during the past year.
Nike Stock Could Surmount Round-Number Resistance
Nike stock has performed even better than Apple after the last six VIX jumps of more than 40% in a day. Two weeks after this VIX signal, NKE stock was higher 100% of the time, averaging a healthy gain of 4%, according to White’s data.
Today, Nike is among the best of the Dow, last seen 1.5% higher at $59.86. The shares have performed well since a late-June bull gap after earnings, and notched a new annual high of $60.53 on Aug. 3. In the past year, though, NKE shares have struggled in the $59-$60 area, but another 4% rally would put them comfortably north of this region, at $62.25.
From a contrarian perspective, the sentiment picture paints a pretty portrait for would-be bulls. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Nike’s 10-day put/call volume ratio of 1.61 is at an annual high. In other words, options buyers have picked up NKE puts over calls at a much faster-than-usual pace during the past two weeks. An exodus of vanilla bears could propel NKE even higher.
Meanwhile, just over half of the analysts following Nike stock consider it worthy of a “buy” or better endorsement. A round of well-deserved analyst upgrades could lure more buyers to Nike’s bandwagon.
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