Large caps are lagging behind “meme stocks” in 2021
Cryptocurrency and the like “Meme” stocks have been on everyone’s lips in the last few months. But while the Crypto and Reddit Buzz Well-known FAANG stocks like Apple Inc (NASDAQ: AAPL), Alphabet Inc (NASDAQ: GoogL), and Netflix Inc (NASDAQ: NFLX), saw their own remarkable market moves. In particular, the market is currently littered with large cap companies that are actually declining over the course of the year (YTD). The focus today is AAPL, which has lost 6% YTD since Friday. The last time equity lost that much by June was in 2016.
The main finding that strikes me as odd is that meme stocks go up about 10% on average every day. It does so while larger capitalization big names – titans of their industry who ultimately support market fundamentals – are struggling and have been declining since the start of the year.
For example, Apple has spent very little time in positive territory this year, as can be seen in the graph below. This suggests that the market is weak and that the “quick buck” has switched from cryptocurrency to small-cap meme stocks. It remains to be seen, however, whether investors will revive their love of large-cap tech names that led the market out of Covid-19 quarantine.
Regardless of AAPL’s next move, it was a bit of a frenzy in the stock option pits. The stock just popped up on Schaeffer’s senior quantitative analyst Rocky White’s list of stocks that rose the most option volume over the past 10 days. According to White, 1,417,825 calls and 659,470 puts were exchanged. The two most popular contracts during this period were the weekly call on May 28th. 127 and the call of May 130th.
Now seems like a good opportunity to weigh Apple’s next move with options. The security’s Schaeffer’s Volatility Index (SVI) of 23% is in the 15th percentile of its annual range, suggesting options players are now pricing in low volatility expectations. Ultimately, the security’s Schaeffer’s Volatility Scorecard (SVS) ranks 83 out of 100, meaning the stock tends to exceed those volatility expectations – a boon for option buyers.
Aside from Apple stock’s own tech setup, the way it lags behind the faster 2021 names reflects the broader rotation of tech names. Whether this relationship between Reddit darlings and tech heavyweights like AAPL retains its seemingly inverse nature is something investors will have to watch for in the latter half of 2021.
Bernie Schaeffer’s subscribers Chart of the week received this comment on Sunday June 6th.