Monday, December 03, 2012

Apple Inc. (AAPL) H&S Top Pattern






AAPL is forming the right shoulder of a H&S top reversal pattern. We note high volume on the left shoulder which is typical of the pattern.  The strong uptrend begins to wane as the head forms on less volume and then, finally we confirm the pattern when we observe really weak volume on the right shoulder.  We had a volume spike when AAPL capitulated on Friday November 16th.  Since then AAPL has retraced on declining volume.

We expect the right shoulder to top out in the ambush zone or the blue line which lines up with left shoulder.  After we breach the neckline, we might get a dead cat bounce, followed by a measured move down.  The measured move should be the approx.length of the top to neckline, in this case $200 (705-505).

6 comments:

2d238394-3d67-11e2-b4fa-000bcdcb2996 said...

Hi Jamie,

I thought the RS takes as much as the LS to form in a H&S top.

With the best quarter in play for AAPL how would you position yourself with AAPL during this quarter ?

Thank you.

Jamie said...

Hey 2d2,

I'm not sure about the time element of the RS vs. LS. However, I would say that price is more important than time.

The short will likely fire off before the next earnings report, so I will take a partial ahead of earnings and possibly hedge the balance with options.

2d238394-3d67-11e2-b4fa-000bcdcb2996 said...

Appreciate your response. if you were to play with options for the earnings drop, would you consider selling a Feb 600 call and buying a 500 Feb put ? Its a collar strategy. Just learning to do options. Thought I will run it by you. ty

penelope cruz said...

Is this it ? Jamie, is this the RS that you were talking about ? Its sooner than what we thought. Almost straight out of a textbook..

Jamie said...

2d2,

I'm not well versed in options. Can't help you with that.

Jamie said...

penelope,

I hope this is not it. We didn't reach the ambush zone. I'm expecting another ambush long which will take us into the ambush zone before AAPL rolls.

I will post two possible scenarios.