10/2 Tuesday
So there are lot of questions to if the Head and Shoulder reversal pattern is confirmed on $AAPL.
Many traders are coming out with different ideas what it means to confirm the head and shoulder on $AAPL.
Hopefully I can contribute to satisfy some of those curiosities.
Duration of the Formation
Technical analysts say that Head and shoulder should form in the period of 2-3 months to be a textbook HnS pattern.
However we’ve all seen HnS pattern that has formed before 3 months period time so I usually don’t put much weight on that however for this $AAPL HnS formation I do put much weight on it. Because of the left shoulder being wider than right shoulder, we might be bouncing off of 50EMA and forming wider right shoulder to match with left shoulder duration.
If that happens, it isn’t good for bears (sux for me) since the earnings is on this month.
Where do you Draw the Neckline?
This is VERY important because you can say it is confirmed or not confirmed by looking at the neckline and see if that neckline is broken or still holding.
Let’s assume that the right shoulder has been confirmed.
Technical analysts know that when drawing important pivot areas, you draw from the closes which means we flip it to the line chart to draw the line effectively.
It looks like this when we flip back to the Candle chart.
So if we draw the neckline from the line chart, you can see that we have broken our neckline and it seems as though, we are kind of testing that neckline as new resistance today.
And this is how I drew my neckline and I confirmed from my analysis that this Head and Shoulder pattern is valid and confirmed. However these things don’t ALWAYS play out like the textbook.
Drawing it under the Candle Wicks
You can see that all of those wicks are confirmed that we have support in that area.
If we do this, the HnS pattern has NOT been confirmed and it is still testing that support/neckline area because today we did not close below that support with strong bearish candle.
If this is true, than we might be bouncing off of this neckline support and come back up and test that resistance of $680.
Subsequently and possibly, it is forming a wider right shoulder to match the duration of the left shoulder. And this could happen for the next 2-3 weeks and bears don’t have that much time because of the earnings.
Bounce from 50EMA?
Possibly and that could become a catalyst for $AAPL to bounce and just continue bullish like so many investors want.
But you see I am not so worried about the 50EMA as much as this Head and Shoulder pattern. That’s what the most traders are looking at and that’s what is going to determine if this stock is going to continue bullish or just straight up TANK.
Since I am holding PUTS, I will need this to tank so I myself am trying to figure this out. Obviously we will have more data tomorrow to work with but as far as today close is concerned, I am not too worried because of other significant reversal signals at the top.
So is it a Confirmed HnS or Not?
*2010 Oct – Today
Looking at it in the big picture, I am NOT completely convinced that it is confirmed.
Looking at it in the pure technical point of view, with the line chart drawing, Yea…. but I am just not satisfied.
So there you have it. I will update more tomorrow, hopefully we will have more clear picture.
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10/3 Wednesday
– HnS NOT Confirmed Yet
-We had a long-legged Doji yesterday and today we bounced with good looking white candle thus forming a Morning-Star Reversal pattern. This is a bullish reversal signal when it happens at support (Support $655)
-HnS Pattern is NOT yet confirmed and at this point we are not going to validate the line chart drawing neckline. But going with candle lower wick supports/neckline at around $655.
-As I have talked about it in previous post that we probably going to form wider range of right shoulder just to match the left shoulder to fulfill complete HnS pattern.
-As you can see on my chart that $688 is going very solid short-term resistance. About 6 times we’ve hit that and retraced last two months. So I am pretty sure we are going to get up there this week and test that resistance once again. I do believe we might be forming a short-term tight channel consolidation between price point of $688 and $655 until it breaks on either side. We do not know which way it is going to break but we do know that we are going to be stuck there for a while. (few weeks IMO).
-To make this HnS pattern confirm, we MUST close below $655 area with good looking bearish candle.
-Take a look at my averages (I use 10,20,50EMAs and 100, 200SMAs – works great for me to figure out shor-term trends and as well as long term trends). You can see that 10 & 20 EMAs have been just pounding on this thing all the way down to 50EMA.
-50 EMA says ‘No way’ and pushed it back up and now we are stuck just in between.
-What is this mean? I means.. we are stuck. lol its true.
-Which way is it going to go? We have pressure from both below and above. But to determine where we might go, we should look my pivot areas which $680 is the logical next resistance area but definitely we can neglect the fact that 10/20EMAs have been such a huge roll in this bearish move.
*Conclusion for today : Yes. I am still bearish (looking at next 2-3 weeks) and I am still holding my massive put options that I wrote last week. The reason being is that we still have many bearish reversal signals that has been confirmed at the top (check my other post regarding this). However looking at it in the short-term (like few days), I am bullish until about $680. We will test that resistance for sure.
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10/5 Friday
– Head and Shoulder Yet??
*Line Chart
-You can see on this line chart that we have clearly broken our neckline on the right shoulder.
Let’s flip it to the Candle Chart and see how it looks.
So look like this in candle chart.
-On Tuesday, we dipped to about $650 but bulls came back thus leaving long lower wick there.
But today we had the same concept however Bulls were no where to be found. Bears just crushed it today and we traded all the way down to the same price point where we touched on Tuesday which is around $650.
-BIG BIG difference with today and Tuesday is this. We closed below the neckline. Bulls did NOT come back up thus putting the price above the neckline. So now we have this almost Marubozu (no wicks) candle. Very very strong candle. Today’s move is so much stronger than Monday’s move because it came out of Bearish Flag pattern (last 4 days).
-$AAPL moved down found support at around $655 and it moved up a little bit forming a Bearish Flag and today it TANKED. This sets up for another bearish day next Monday in my opinion. Maybe three black crows is in store.
So Is the Head and Shoulder Confirmed?
I would say we are VERY VERY CLOSE but not yet…
-I know we had great bearish day today but even with the line chart confirming that the neckline is broken and possibly this is a confirmed head and shoulder. You see the thing about the stock market is that it never plays out like a text book. It makes its own rule. It will form a pattern of sort but they don’t ever play out exactly like the textbook. And that is why eventhough it appeared as the neckline has been broken, I am just not completely convinced that Head and shoulder is confirmed.
-If we see another bearish day on Monday after close, than I will say and treat this trade as though Head and shoulder has been confirmed. We are setting up for some new bearish trend.
-The candle pattern you see on there is Three Black Crows if we close with another dark candle on coming Monday. At that point, it is very highly and likely that we will bounce off of $640 to upside and test that $650 as new resistance. possibly form a Pennant or Bearish Flag and after resting $650 resistance, it will TANK. You see.. that’s a TRUE Head and Shoulder pattern.
–If this happens on Monday after close, ALL HELL BREAK LOSE. $620 next target and possibly $580 is ultimate target for me.
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-My 11 days of Bearish Trade on $AAPL
https://2tradersclub.com/aapl-bearish-divergence-warning-daily-weekly/
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28 thoughts on “$AAPL – Head and Shoulder Confirmed or Not? (Update 10/5)”
yes, I have been puzzling over this as well. came to the same conclusion: no conclusion yet. Thanks for the article & charts.
yea~ well we will have more data and see if that pure technical (line chart drawing) is confirmed
really curious to get your take on today’s movement in the context of all your great analysis. BTW, love your site, learning a lot from you. Thank you very much for doing all this. Your commentary with the charts is the best.
Thanks Steve! looking at today’s candle, we can safely say that line chart drawing neckline has failed for this particular stock and I am going with drawing it under the wick neckline. I am actually doing analysis for today’s action. I will post it in a bit
i own quite a few shares at 686… now to decide ft i will hold or sell when we hit resitance at about 680.. take my loss but free cash in case it drops and rebuy at a lower rate possibly or ride out the possible storm till the chart becomes more bullish you gave me alot to think about overnight thank you
hi cheri, yea you could put your stop at around $650 or so. cuz if we close below $655, we are BEARISH pretty strong and all hell break lose. However $AAPL is extremly bullish stock (looking at it as a whole) so we might actually bounce from here and continue bullish. if we close above $680 with good looking bullish candle, you are good for your bullish side.
I know that you analyze it from a purely technical standpoint but don’t forget about the announcement coming on the 10th about the new iPad Mini event which will take place on the 17th followed shortly by earnings a week later. There are a bunch of potential big events that will change your charts.
possibly yes and i thank you for that insight
I’m also looking at this possible massive weekly H&S April as left shoulder, with great volume followed by the recent Sept peak on lighter volume. The duration is pretty long IF this were the case but “the longer time period between the peaks and greater the height of the pattern, the greater the potential impending reversal” per J. Murphy. This is either a very visible obvious pattern or could just be my imagination.
possibly but its hard to tell at this moment as we don;t have enough data as we havent even begun to form right shoulder yet. it could be just a huge pull back before continue bullish (BIG PICTURE)
Have you checked October 2011 around this same time? You will see a similar pattern where we tested lows a few times (4 I think) then the stock ran up for $369 to $420 into earnings, then back to $390. I’m hoping that starts to happen on 10/9 before the iPad announcement. They also might give a hint into iPhone 5 sales on 10/10 or 10/17’s show as they did with the iPad.
Oct 2011 and now is completely different senario bro. Ask any real technical analyst.. im wondering if you are able to read the charts. On Oct 2011, we were trading very nicely on uptrend channel. Today, we have so many reversal signals up top its no joke. https://2tradersclub.com/aapl-10-reasons-of-why-im-extremely-bearish/ so none of ur argument is relevant at this time. If you want to compare, compare it with April-May 2012.
I appreciate you sharing your thoughts. How soon do you think the 620 test could occur? This week or do we need another week of this pattern to develop?
this is what i think its going to happen. we are going to have another bearish day on Monday (thus forming a Three Black Crows pattern). It’s going to test $640 as new support and bounce back up to test that neckline of $655 as new resistance. we are going to stay there maybe several days and than if that resistance does not hold, its going to tank again and at that point, we are going to see $620. 1-2 weeks
There is some nice positive divergence on MACD. aapl responds well here historically it seems. So that 640 area could be a 1X event and we bounce and head higher into mini and ER, or it fails like you suggest. The question is, do you buy at 640 or wait……not sure on that one
I always wait until you see some reversal signals. So if it gets to $640 you dont just buy long but you wait and see the confirmation of bounce than buy. i mean its just wut i do. Dow Theory “Trend is assumed in effect until it has given definite signal that it as has been broken”
Thank you, very detail analyst and thought, it helped me a lot, question: with this bearish move did you buy Oct put or Nov put?
I am holding Nov. put. You don;t want to buy Oct put as the time value will suck your premium.
Do you think a bounce off of 640 and retrace up to 655 is shortable at 655 if it is not broken through to the upside? Thanks
exactly. If I am not in this downside trade yet, I would wait until it bounces off of $640 to $655. wait until confirmation that $655 is solid resistance and when it starts to fall back down, then get in with puts or shorts
Got it….thanks
opening down. Does this “confirm” enough, or wait fo add puts when if we test 650-652 area?
not confirmed yet. $640 holding. we might be feeling gap this week
you mean filling gap at 652?
lol i said “feeling” but its technical could be true. Cuz we might not actually fill the gap all the way up to $652. Anywhere from $647 – $652 could act as resistance.. so I am thinking we are going to slow down here on and we might “feel” those gaps and test and see if its going to hold and then roll over. But possibly we might even fill it all the way up to $652 or even test the right shoulder neckline of $655-$650 area.
seems EVERYONE is predicting this same pattern, so I therefore then wonder when everyone is seeing it…..I have not idea, but we’ll see soon
if 100SMA / $620 area is broken, we are going to $580 level for sure. and that’s the absolute bottom for $AAPL IMO. https://2tradersclub.com/aapl-bearish-divergence-warning-daily-weekly/
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