This chart is one for the textbooks, it contains so many elements of and lessons on charting and technical analysis. For any of you who are learning, I thought it worth the time to go through some of the key elements:
1. Bullish Island Reversal - Generally, Island Reversals are VERY bullish (or bearish, at tops). The low of this Island Reversal in January was roughly a two-year low in the stock, and AAPL needed to do something VERY bullish and it did, on the reporting of January earnings.
2. Bullish Falling Wedge - (October, 2008- March, 2009 pattern in blue)
This isn't a particularly bullish pattern because when it breaks out, there is a lot of price resistance/price congestion immediately to the left of the breakout from the candles contained with the wedge.
When AAPL broke out in early February, it rallied only for three more days, to 103.00, very near the last high of the Bullish Falling Wedge at Blue Data Point #4, which was 103.60. Coming off that 103.00 high, we can label that Black #3 and look for the Bullish Falling Wedge to "morph" (change) into a Bullish Inverse H&S or a Bullish Ascending Triange pattern.
What followed the 103.00 high is one of the reasons that I'm not very fond of Bullish Falling Wedge breakouts. Retests of pattern breakouts are common and are to be expected. With a Bullish Falling Wedge, the top of the pattern is falling ... falling ... falling, and a retest of the breakout means that price has to go down ... down ... down. And, it did.
3. Bullish Falling Wedge Retest - It was an apparent failure when AAPL closed below the top of the wedge on February 20, and again on March 6. UGH. March 7 was another close below The Wedge on a "possible, hopeful-looking" Bullish Inverted Hammer, but it needed upside follow-thru to be anything more than "possible."
4. Bullish Morning Star/Bear Trap/Data Point #4 - March 10 was a VERY bullish session because it established 3 "Tells:"
a. It completed a 3-Day pattern in the candlesticks known as a Bullish Morning Star. Day 1 is down on a long, black candle. The March 6 black candle could have been a bit longer, but "close enough." Day 2 is a doji, the "star" part of the pattern. This one was a Bullish Inverted Hammer. Day 3 is a strong white candle, completing the Bullish Morning Star.
b. The strong white candle of March 10 got APPL back above the top of The Wedge, establishing a Bear Trap, trapping anyone who thought that the CLOSES below The Wedge were bearish (which they sure looked to be at the time), and sold, or sold short.
c. The low of the Bullish Inverted Hammer established Black Data Point #4 for the ascending line of the "morph" (change) from the Bullish Falling Wedge into the Bullish Ascending Triangle.
There was no "telling" on March 10 just HOW bullish that session was, but with one peep at the chart, we can see that it was a moonshot to the upside thereafter.
5. 103.00 Triple Top - The highs at Black Data Points #1 and #3 were 103.60 and 103.00, respectively for the flatish Double Top of the Ascending Triangle.
The highs of March 18, 19 and 20 all were in the 103's, for a Triple Top. Triple Tops and Triple Bottoms aren't rated to hold. There's no "always" with these things, but the likelihood is that they well get taken out, as this one did. AAPL broke out on March 23 on a strong white candle.
6. Ascending Triangle Retest - Unless/until a trendline or a breakout gets retested, we don't have any validation from Ms. Market whether or not we've got it right, and we have to decide if we want to go with what we've got, or not.
On March 30, at the green arrow, AAPL came back to the breakout, just about nailed the slightly downward-sloping trendline (from the 103.60 and 103.00 highs), then ralied into the close on a Bullish Hammer. Ms. Market said, "Yep, the top of the Ascending Triangle IS support."
Summary:
Final validation for any pattern breakout or breakdown is if/when the target is achieved, or comes reasonably close. I always use the more conservative of my choices to establish targets, so that I'm not overly-ambitious:
103.00 - The more conservative of the 103.60 and 103.00 highs
78.20 - The low of the Ascending Triangle
103.00 - 78.20 = 24.80 points of upside from the point of the breakout.
The trendline at the top of the Ascending Triangle was 102.585 when APPL broke out, so 24.80 + 102.585 = target: 127.39 IN PLAY. If we used the 103.60 high, that would put 127.99 IN PLAY.
On Friday, May 1, the Ascending Triangle target of 127.39 got MADE. AAPL printed a high of 127.95, four cents from the 127.99 target if anyone had used the 103.60 high to measure the pattern.
For its overall perfomance since the January low, particularly for getting to the Ascending Triangle target in a Bear Market when we all know that technical analysis DOESN'T work (LOL), APPL's scores for technical merit:
10...10...10...10...10...10...10
2 comments:
I'd give you an 11 Melf even though I have a few puts on AAPL. Where do we go from here with AAPL? And your SPX analysis was excellent.
Thnx.
Thanks, Katzo. When a target gets MADE, as the Ascending Triangle in AAPL just did, it only suggests "that's done," and that it's a good idea to "take profits, or at least some profits, when targets get MADE." It doesn't tell us anything at all about the future direction of AAPL.
Good luck with your puts!
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