NOTE that the ticker here is AAPL but we are actually discussing the VIX. They are heavily related, as will be explained. I want to get this idea published quickly so I am likely going to cut some corners I would otherwise like to explain more of.
I see the chart here doesn't include my drawings, so here's an attachment of it--
For those that understand Implied Volatility (IV) and how it moves in tandem with a stock's Earnings Report, you understand concepts like the run-up rise in IV to earnings and its subsequent CRUSH on the majority of earnings. Most earnings reports have all this pent up expectation for a wild swing in one direction or the other, but once earnings happen, the overwhelming majority of the time expectations for a big move dissipate and IV drops usually 20-50% in the following week(s).
The VIX is the Implied Volatility of the SPX index. The largest corporations with the greatest weightings in the SP500 are reporting (or have already reported) earnings this week.
MSFT dropped on its earnings about 2.5%. It's IV30 is down about 18% REGARDLESS
TSLA dropped on its earnings about 6.0%. IV30 is down 16% REGARDLESS
The most likely scenario is after today the Implied Volatility on AAPL, FB, QCOM, and then tomorrow with other heavyweights AMZN, XOM, CVX, etc, are all going drop. If those IV's drop, the VIX is very likely going to drop as well. Could it rise? It did back in April 2019 and July 2019, but if we're looking at statistical likelihood, its not high.
Speaking seasonality, May and July tend to be the two least volatile months, making May-July typically the least volatile stretch during the year.
Once we have hurdled earnings season, hurdled today's FOMC, hurdle some of Biden's speeches, plenty are vaccinated already or scheduled to get one, we are going to run out of FUD- Fear, Uncertainty, and Doubt. This doesn't necessarily mean massive bull run, it could in reality mean a lot of boring doji days. In my opinion what I see next is another melt-up that might stoke the VIX in late May-early June. We'll see.
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Figured I would add some assessment and thoughts on what could be next.
Obviously the reaction to AAPL earnings was not good. Initial reaction saw price shoot up only to get sold heavily into the spike and move down. Like the majority of earnings, the day after we saw IV crushed about 30%. But then the market saw IV at a discount and decided to buy it up. Like I had said, the VIX correlates really well with the largest and heaviest weighted stock's IV, so when AAPL's IV jumped, so did the VIX and the market wobbled yesterday morning.
Let's suppose AAPL 's move down is NOT DONE. I see a recent support around $118-$120-$124 area. It is possible today is an Inside Bar/Candle day that breaks to the downside tomorrow and we get blood. But even then, the BIGGEST spikes in AAPL's own IV (measured by both the VXAPL and Market Chameleon's chart of historical AAPL IV30) are 50%. An extremely unlikely, but possible, peak would be a 100% spike. This would be devastating but I truly believe that selling the volatility would be a terrific play.
^^ Downside in PRICE does not need to produce excessive IMPLIED Volatility