Apple’s (AAPL) short position has dropped by 9% ahead of earnings, potentially signaling a post-earnings decline. Intel’s (INTC) negative trend may continue.

AAPL's short position typically declines the week before earnings, usually by 3%.

This week, the short position has decreased by 9%.

The pattern indicates that the greater the decline in the short position, the more the stock tends to drop after earnings.

Generally, when the stock price rallies, the short position increases as part of a reversal strategy; however, it has now decoupled.

The stock typically moves by 4% on earnings, while it is currently implied to move 3%.

The movement after earnings shows a slight sensitivity to the stock's movement beforehand; however, since the return this time is only up by 1%, it is not significant.

INTC has reported negative earnings three times in a row. During COVID, it had negative earnings nine consecutive times. The year-to-date figure is down 55%.

This pattern is not related to the return the week before but is associated with changes in the short position. However, this week, both the return and the change in the short position are essentially zero, leaving no basis for projection.

The issues with INTC appear to be tied to the regime the stock is in, rather than being something predictable.

If INTC is in the same regime negative earnings moves could continue.

This year, INTC's stock level and short position have been negatively correlated, indicating that investors are following a momentum strategy by shorting the stock as it declines.

AAPL’s short interest reduction and INTC’s momentum-driven strategy highlight important trends ahead of earnings, offering key insights into each stock’s post-earnings potential.

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