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).

Apple Inc. (AAPL) Selloff - What Next?

AAPL is about to breach the ambush zone of the fib extension long.  If the selling pauses not too far below $534, we might have the chance to retrace and form a H&S top before the selling resumes.  In the chart above, I hypothesize $525 as an interim bottom to show what kind of a bounce we could expect for the right shoulder.

Technical Picture - Very Bearish

On Sept. 22 we broke out of H&S pattern on decisive volume. From Sept. 23-27 we had a dead cat bounce on lower volume. Since then we have been pushing back down, ending last week on lows.

To calculate the measured move of the H&S pattern, we take the distance from the top of the head to the neckline (blue line) which is approx. 10 points and extend from the breakout point - approx. $116 and subtract to arrive at our target of $106. The August low is a psychologically significant level and its retest could produce a rip your face off, bear market rally (day trade).

Reading the stream this weekend I saw a lot outrageous predictions of gloom and doom based on the H&S pattern and the top that preceded it. I think some people are incorrectly drawing the neckline. We don't move a trendline unless we make a higher high, so the way I've drawn the neckline is technically correct.

Technical Picture - H&S Breakout

Markets traded lower overnight following a disappointing FOMC statement yesterday. We gapped wide and grinded lower for much of the session. From the daily chart of the SPY above we see that our H&S pattern has finally broken out successfully with volume. We are oversold and I am expecting a dead cat bounce soon.

Big picture, if we fail to hold the 61.8% Fib retracement of the 2010 low to the 2011 breakdown low as depicted on the SPX chart below, a full retracement is likely.


Update on the copper futures chart I posted over the weekend. H&S top within a big double top. The H&S measured move is close to target. Here again, I would expect dead cat bounce soon.

Technical Picture - Neckline Break on High Volume

Neckline break of H&S top on high volume. On a measured move basis, target SPY 116.

TUP bear flagging. Looks ready to go tomorrow.

Technical Picture - Correction In Play

After breaking out of a bearish rising wedge, the SPY corrected to the first minor support level and bounced in the last hour to trim today's decline. The Nasdaq corrected more sharply on higher volume resulting in a distribution day. Most technicians expect a retest of SPX 1340 (former resistance) to come into play.


The SMH retested resistance and is now pulling back on light volume which is constructive. Bullish gap support might be tested.



Th parabolic SAR sell signal for silver ishares triggered yesterday as depicted on the chart above. High volume selling over last two sessions.

The beaten down $USD is forming a tiny base. This could lead to an oversold technical bounce and move back towards the downsloping trendline.

Today's Trades

When I logged into my broker account this morning, there was a bulletin advising of an increase in margin requirements for silver derivatives. This was a good clue that SLV could be under pressure again today.

CTSH was a failed BO yesterday, and today's gap down and breach of support, set up a good shorting opp.

The best part of the CTSH trade was the reversal long after price formed a perfect, low risk handle on the 1 minute chart below.

At the EOD price broke back above resistance. I'll be watching tomorrow to see if CTSH forms a bullish inverse H&S bottom.

ARMH, another failed BO from yesterday, set up a short on break of well defined support. Took a partial at gap support, but eventually it failed. Covered balance as price approached complete gap fill. Not much of a bounce after such a big move.

Technical Picture - Nasdaq Clears Resistance on Strong Tech Earnings

As we can see from the chart above, the NASDAQ took out preliminary resistance at 2800 on the strength of tech earnings from AAPL, FFIV, and QCOM. Volume was lighter likely due to the holiday shortened week. Hopefully, we can hold 2800 as support next week, however, semi names reporting Thursday night were mostly down (SNDK, CY, RMBS...).

S&P closed just shy of resistance as depicted on the chart below. Now we have a perfect inverse H&S pattern. On a measured move basis, a successful BO target would add 90 points to SPX 1430.

On the SPY chart below we highlight the gap support area. Some backing and filling prior to BO would come as no surprise given the short-term extended posture.


Some of the bigger names reporting earnings the week of April 25th-29th:

• Monday: ABFS, CYOU, BEAV, BPOP, ACGL, MAS, RCII, SANM, UCTT, VECO, WRB, and WCN.
• Tuesday: MMM, ACPW, AKS, ACI, AN, CPLA, COH, KO, DAL, F, GPI, HSY, ITW, LMT, LO, MHP, ODP, PCH, RYN, UA, X, UPS, LCC, VLO, WDR, ADVS, AMZN, AJG, BGS, BDX, BRCM, BWLD, CNI, DV, EHTH, FORM, IRBT, LIFE, MIPS, HA, RFMD, SSCC, SWK, SFSF, SMCI, UHS, USNA, VSI, and WBSN
• Wednesday: ARMH, AUO, ABX, BA, BP, EAT, COP, DPS, ENR, GD, LAZ, LAD, ERIC, MSO, MCO, TUP, WLP, WHR, AKAM, ALL, AVB, BIDU, EBAY, FLEX, FLS, LOGI, MBFI, NSC, ORLY, SBUX, TQNT, and VAR.
• Thursday: ABC, BWA, BGG, BMY, CAB, CAH, CELG, CME, CCE, CL, XRAY, D, DOW, XOM, BEN, HEP, HST, IMAX, KBR, MJN, OXY, OMX, OSK, PEP, POT, PG, PHM, CELL, CSTR, DECK, TWC, STRA, KLAC, MSFT, MWW, NTGR, SIMO, TRLG, and VRSN.
• Friday: AXL, CAT, CVX, DHI, FLIR, GT, LEA, MRK, and WY.

SLV - Watching for short-term blow off top as price edges above the upper BB and trades along the upper channel line.



USD testing the upper level of support zone. Looking for an oversold technical bounce any time now.

Biotech Day Trades

After last Monday's huge earnings gap, AMRN formed solid base, setting up a target trade back to the upper range of the gap up day.

AMGN and TEVA were earnings disappointments, setting up downside extensions.

Technical Picture - Modest Gains

Markets are little changed since my last post on April 5th. Tech is till lagging with weakness in tech titans AAPL and GOOG, as well as disappointing guidance from INFY late last week.

The SPY is carving out an inverse H&S pattern, but earnings will be key.

Companies reporting earnings the week of April 18th-22nd include:

• Monday: C, LLY, HAL, KEY, AMTD, GWW, TXN, and ZION.
• Tuesday: BK, CMA, FRX, GS, JNJ, NTRS, BTU, STT, USB, CREE, CSX, HBHC, IBM, INTC, ISRG, JNPR, MANH, STX, STLD, VMW, and YHOO.
• Wednesday: ABT, MO, AMB, T, ATMI, ELN, EMC, FCX, HBI, FCX, NDAQ, DGX, WFC, AMGN, AAPL, CPHD, CAKE, CMG, ETFC, FFIV, GILD, LRCX, MAR, QCOM, WDC, and YUM.
• Thursday: BBT, BIIB, BLK, CNH, CY, FITB, GE, MCD, NOK, NUE, PCX, PM, SLB, TZOO, VZ, AMD, SNDK and SYNA.
• Friday: Markets closed in observance of Good Friday
  

AAPL has carved out a bearish H&S top. Earnings on Wednesday.



Friday's Trades - MBI low risk entry as price moves out of the retracement zone.

CTSH - I was looking for a short entry around $78.50, but didn't get a NRB, so I passed. After a minor extension, price formed a nice base at $78.50 and took it long back to the ambush zone. Should have shorted the ambush because there was no volume on the rally.

Thursday's Trades - JBHT - gap and flag.

CAT - Low risk long on break of flagging type pattern. Add on the B&B setup.

Technical Picture - Consolidation - Markets Mixed

We had little in the way of catalysts during the trading session, to move the markets, hence we printed inside days. After hours TXN announced bid for NSM at 70% premium over closing price. This prompted buying in SMH and more specifically in names similar to NSM such ADI, MXIM, ISIL, and LLTC.

We'll see if the euphoria carries over into tomorrow's session. At the moment, the S&P futures are ticking down as depicted below. Support in the 1320-21 area looks good and I would be a buyer, notwithstanding negative news.

QCOM forming bearish wedge. Prelim. target $50.00. QCOM popped after hours on TXN/NSM news, but I doubt it will hold for long.

Day Trades

ALXN - Fib. retracement trade

TCK - Traded in my swing account. TCK is on my short WL of Canadian stocks (mostly commodities). TCK formed a bullish flag on 5 min. timeframe. I took a partial at full extension and swinging the rest. From the daily chart above, we see an inverse H&S pattern basing for a BO. Full measured move will bring us back to highs and beyond.

RHT formed a nice flag pattern (tweeted by Independant trader). Exit after it formed a bearish tweezer top, because it just didn't have enough profit at that point to partial and ride it through.


RIMM - shorted break of PDL and it snapped back. What else is new? I keep trying the same bear flag BO trade and keep getting the same result. I was getting a little discouraged, but deep down, I knew it was going to break eventually. So I sat back and placed my Fibs from Friday closing handle to opening swing low and waited to see if anything developed. Price rallied to 1.27 FE, carved out some bearish long upper shadows, and fell back into the retracement zone. So I decided to short again as price broke out of the Rzone. Finally, lower prices. Took a partial at weekly S2 (1.62 FE). Price then retraced sharply, sort of forming a triangle into the close.

Not sure what to expect tomorrow. Felt there wasn't enough volume on this move lower, to risk a swing on the second half, but I will get back in if we break $53.85.

Technical Picture - Modest Gains on Favorable Jobs Report

INDU is testing February highs. I'd like to see a retracement here so that we can carve out an inverse H&S pattern, before attempting to move towards the top of the channel.

Small caps are testing 2007 highs.

The SPY gapped up on the favorable jobs data, but a mid-afternoon swoon brought us back to the base. Black candles can be bearish as they highlight gap fades. I'm interested to see if new money will come into the market as we begin a new month, or if we get some sort of constructive retracment before attempting to make new ground.


My main concern is the NASDAQ which has yet to confirm the price action of the other major US markets. We saw late day selling in AAPL (20% of the QQQ), weakness in a number of cloud names, and the SMH appears to be falling out of bearish rising wedge with volume (see SMH chart below COMPQ). Also, copper, a leading indicator, is printing lower highs. These are red flags. The broader markets can't continue higher if the COMPQ fails to confirm and pulls back.

Watch List Stocks

AAPL looks vulnerable to further selling. Friday's late day sell-off had volume. If it fails to hold the retracement zone as support, it will likely retest the base (blue line).

ALXN is testing $100.00 resistance again. Large scale buying into the close, pushed the stock just above $100.00. I would prefer to go back and fill the gap before breaking out, but ALXN might not wait.

ISRG attempting a big level here. Breaking out on good volume. I'd like to see a few days consolidation (coiling) in the upper shadow of Friday's stick, before moving above $350.00.

RIMM bear flagging, closed near lows on Friday. If the BO closes below next support at $54.60, I'll hold for a swing. There's virtually no support between $54.60 and $50.00 as we had two WRBs on the BO of the base back in October. That's why I find this setup so compelling.

AKAM setting up a mini inverse H&S pattern. Measured move target 100%.

RVBD looks like it might be forming a H&S top.

FFIV - The Fibonacci symmetry on this chart is a thing of beauty. After gapping down on earnings, price retraced to the ambush zone and the downsloping 50 SMA and extended to the Fib 1.27 level. We retraced to Fib 1.0 and now it looks poised to extend further. $80.00 seems like a realistic target, if FFIV fails to hold the 1.27 level.

Day Trades

GES caught my eye on the open because of the gap up. I placed my fibs from the late day handle to the opening swing high and waited to see if it would set up a reversal in the ambush zone. It did, so I took it for a long. My target was the high of the earnings gap down bar on the daily (blue line) on the chart above.

VRUS was a gap continuation play. If we ignore the opening range, we see an orderly base on base setup. My target was $81.00 which represents a full measured move on the daily. (See Thursday's post).

I thought the third test of the support zone on RIMM would finally break, but there some large buyers sitting on support and I took a small loss. Price rallied back towards the 5 day EMA, carved out some bearish looking upper shadows, formed a base and broke back down, so I shorted it.