The first chart above is the 20 yr. monthly timeframe for AAPL. We can see from this chart that in the 2008 crash, AAPL retraced into the ambush zone setting up for a normal measured move. After a retest of the 2007 highs, AAPL went straight up and blew past Fibonacci targets in a series of Fib. extensions (high to high).
The second chart of AAPL is the daily, where we focus on the last successful Fib. extension long. After breaking out of a lengthy consolidation, AAPL ripped higher and then pulled back to the ambush zone of the last leg up (high to high) and then proceeded to trade to target 23.6% Fib. extension (green dotted line).
Two indicators foreshadowed an interim top to this incredible run in price:
- Negative divergence of the RSI to higher prices, and
- The lack of volume in comparison to the move into the previous peak.
After completing a target on a Fib. extension, we redraw the Fib lines from the same anchor to the new high. If we blow past the 23.6% target in a big way, we redraw the Fibs from the previous peak to new highs and start a new extension. Since AAPL just breached the target by a few points, no need to start a new extension.
The 3rd chart above, shows that AAPL failed to hold the 61.8% support line of the last Fib. extension.
This failure means that AAPL can now retrace all the way half way back (HWB) from the initial anchor in our series from our monthly timeframe which was the 2007 highs.
The last chart is a weekly timeframe which shows how we might get HWB. The 1st senario, is that we retest capitulation lows set on November 16th, and then trade HWB from highs as depicted by the white arrows on the above chart, or, we trade straight down to support. Notice how the target for the ambush short lines up very closely to 50% retracement of the support long.
I favor the 1st scenario because we usually like to trade the first setup after a trend break. It would seem strange that one of the most technical stocks in the market wouldn't setup a technical short to get us back to support.
The target if the support long is successful is $823.00. The correction is healthy.
I've pretty much abandoned the H&S top scenario. One reason is the slightly downsloping neckline. In my experience, this chart pattern works much better when the neckline slopes slightly upward.
Click on the charts to enlarge.