Apple (NasdaqGS: AAPL) shares are down nearly 40% from their all-time high to weigh on Nasdaq-100 and technology-sector ETFs that have large positions in the company.
Apple’s 12% pullback Thursday after quarterly results that failed to meet Wall Street’s lofty expectations also dinged options traders who had placed bullish bets with ETF options.
For the three months ended Jan. 24, PowerShares QQQ (NasdaqGM: QQQ) is up 2.9%, while SPDR S&P 500 (NYSEArca: SPY) has more than doubled that return with a 6.7% gain. Much of this underperformance can be blamed on Apple. [ETF Chart of the Day: Apple and the Nasdaq-100 Index]
Apple’s weighting in QQQ, the Nasdaq-100 ETF, has been reduced by the stock’s recent nosedive but it is still the largest holding at 13.5%. The next-largest stock is Microsoft (NasdaqGS: MSFT) at 7.4% of the fund.
In Technology Select Sector SDPR (NYSEArca: XLK), Apple represents 16.5% of the ETF.
On Thursday, options volume in XLK surged to four times the daily average after Apple reported earnings, WSJ.com’s MarketBeat blog reports.
One investor took a 63% loss on a position in the tech ETF after Apple’s quarterly results failed to excite, according to MarketBeat.
“That was an ugly trade,” said Joe Kinahan, chief derivatives strategist at TD Ameritrade, in the report. “It was a cheap direction bet on Apple earnings that went bad.”
However, some technical analysts see support for Apple at the so-called Fibonacci 38.2% retracement line from the September high of $705.07 a share.
“Sentiment for the stock is also now very low. Every analyst and their dog seem to be rushing to downgrade the share, the very same analysts who throughout last year, and then at the highs, insisted that their clients buy the share,” says Tarquin Coe at Investors Intelligence.
“The chart also looks very broken, with a huge top evident. However, that appearance coupled to pessimism which is likely now at its nadir, provides the perfect setup for a short-squeeze, then recovery,” he wrote in a newsletter Friday.
The chart below shows the relative performance of the Nasdaq-100 (QQQ) versus the S&P 500 (SPY). When the chart is falling, the Nasdaq-100 is trailing the S&P 500. The recent underperformance of QQQ is due in large part to Apple.
Full disclosure: Tom Lydon’s clients own QQQ, SPY and AAPL.