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Apple Earnings Could Reveal China Secrets

Tuesday, 10 Jul 2012 | 6:39 PM ET

With earnings season underway, investors are understandably turning attention to bellwether reports.

And few are more eagerly anticipated than Apple.

With the technology titan scheduled to release earnings in about two weeks what should you be watching?

Although there are many company specific metrics that pros will use to trade Apple, CNBC's Fast Money traders say the Street will also be using Apple as a broader economic ‘tell.’

Specifically, they’ll be looking to see what Apple has to say about China.

With reports hitting the market on almost a daily basis that China is struggling to maintain growth Apple earnings could reveal all of China’s secrets – that is if there are any.

“If we find out Apple is seeing a deceleration of sales in China – it will trigger downside,” says trader Dan Nathan.

In other words, if Apple gets dinged by the Chinese economy, pros will assume every multi-national will get dinged. The Street will say if Apple can’t make it through unscathed, nobody can.

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That’s not to say Apple belongs in the doghouse. UBS initiated covered with a buy and top hedge fund manager David Einhorn is bullish on Apple.

The Fast pros are simply saying weakness in China could give you an opportunity to buy Apple lower – and the rest of the market too, for that matter.

Weak Demand Hits Chip Outlook
Cummins plunged 9 percent today on news the company lowered its Q2 and full-year guidance today, with the FMHR traders; and Applied Micro Devices & Applied Materials both slashed their estimates yesterday, with Chris Danely, JPMorgan analyst.

* You can find our conversation about Apple approximately 7 minutes into this video clip.

Posted by CNBC's Lee Brodie

Read More from Fast Money:

> Simple Strategies Behind Supersized Successes

> 10 Top Stocks for the Long-Term Investor

> Top Apple Related Stocks for 2012





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Trader disclosure: On July 10, 2012 , the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Tim Seymour is long BAC; Tim Seymour is long SBUX; Tim Seymour is long FCX; Karen Finerman is long AAPL; Karen Finerman is long BAC; Karen Finerman is long JPM; Karen Finerman is long WMT; Karen Finerman is long TGT; Karen Finerman is long GOOG; Karen Finerman is long M; Karen Finerman is long CMI; Karen Finerman is short SPY; Karen Finerman is short IWM; Karen Finerman is short MDY; Dan Nathan is long JULY 7 Puts; Dan Nathan is long OCT 10/5 PUT SPRAED; Dan Nathan is long XLF JULY 14 PUTS; Dan Nathan is long INTC JULY 26/25 PUT SPREAD; Dan Nathan is long WMT JULY 67.5 PUT SPREAD; Dan Nathan is long SBUXAUG 50/45 PUT SPREAD; Dan Nathan is long HOG JULY 44/40 PUT SPREAD; Dan Nathan is long HOG AUG 45/40 PUT SREAD; Dan Nathan is long SDS; Dan Nathan is long QQQ AUG 68/60 PUT SREAD; Stephen Weiss is long VZ; Stephen Weiss is short JCP; Stephen Weiss is short PCAR

For Jeff Kauffman
Sterne, Agee & Leach, Inc. makes a market in the following subject company LUV
Sterne, Agee & Leach, Inc.'s research analysts receive compensation that is based upon various factors, including Sterne, Agee & Leach, Inc.'s total revenues, a portion of which is generated by investment banking activities.
Sterne Agee & Leach, Inc. expects to receive or intends to seek compensation for investment banking services from the subject company and/or companies in the next three months: LUV

For David Bailin
Nothing to disclose

For Dan Ernst
Nothing to disclose

For Chris Danely
Nothing to Disclose

CNBC.com with wires.

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  • Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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Halftime Report

  • Jay Yarow, The Business Insider, and Steve Milunovich, UBS, discuss whether Tim Cook is to blame for Apple's drop in growth. I think it's pretty clear they missed the big phone market and overestimated the success of the plastic 5C phone, says Milunovich.

  • CNBC's Eamon Javers reports on Bill Ackman's stake in Allergan. Javers says this is a classic case of insider trading that is not against the rules.

  • FMHR trader Josh Brown thinks Dunkin' Brands looks fantastic technically, while Mike Murphy says investors are questioning the company's massive expansion plans.