Buybacks vs. Rotation: JPM and AAPL

Many companies are flush with cash right now, so buybacks are going to increase. Buybacks can create plenty of swing trading opportunities.

Buybacks are used by the Board of Directors to drive price upward, or at least maintain price at a certain level. They also remove outstanding shares from public exchanges. The Percentage of Shares Held by Institutions (PSHI) is based on outstanding shares. So with fewer shares outstanding, it can help PSHI hold at a certain level. The Buy Side has been lowering inventory this year. See red arrows on the JPM chart.

In 2018, Buybacks boosted the index components and kept the market from continuing a bear market, which was already underway--a minor bear not a major one. Then in 2019, buybacks surged as the government cut corporate taxes massively. The cash on hand was enormous for most companies so they did mega buybacks, leading the move upward for index components that year. Then, in 2020 the pandemic stock market collapse completed that very odd delayed bear market.

Buyback candles are frequently solid white without wicks or tails. Buybacks often initiate strong swing-style runs, such as they have in $NYSE:JPM. See the blue arrows.


AAPL also announced a huge buyback program in early May. This gives the Buy Side Institutions the opportunity to lower inventories of AAPL too, without disturbing price much, if at all. AAPL is in a sideways trading range, which is a tough pattern to trade since there is no consensus about what the company is doing to fuel future growth.