Apple stock chart traces dreaded head-and-shoulders pattern

“The Apple [AAPL] stock chart has traced the dreaded head-and-shoulders pattern. This is a well-known and well-followed reversal pattern in traditional technical analysis,” Nigam Arora reports for MarketWatch. “In Apple, the left shoulder was formed when the price pulled back from about $680 to about $660 in an ‘outside day.’ An outside day is another reversal pattern.”

Arora reports, “The head was formed when the price moved above the peak of the left shoulder and subsequently fell down close to the bottom of the left shoulder. In traditional technical analysis, when Apple price broke the neck line, it confirmed the top.”

“If you are an Apple stockholder, relax. There are thousands of good technicians, but I have never known one who became rich by making money in the markets. In traditional technical analysis, the down side minimum target is the distance from the neckline break equal to the distance from the head peak to the neckline. By this measure, the first downside target is about $615.,” Arora reports. “In one back test that we ran at The Arora Report, this pattern detected the ultimate top less than 50% of the time and produced meaningful downside only 67% of the time.”

Read more in the full article here.

MacDailyNews Take: Apple longs, avert ye eyes and whistle a happy tune!

37 Comments

  1. Can someone translate that crap into english? I’m so tired of the way these Wall Street analysts talk. Is it so hard to just state what they are trying to say plainly, rather than using all that jargon?

    1. Could not agree with you more!! I HATE this absurd language of theirs. Why can’t they just say things in normal English? I guess it makes them feel important…

    2. Don’t worry about it. this type of “technical” analysis uses the idea that you can look at chart of the price movements and deduce what will happen next. It’s no better than astrology, but it pays better.

      It takes no account of what is happening in the world. It’s essentially saying “all else being equal, this should happen.” But “all else” is never equal. “All else” is what it’s all about.

      It’s a bunch of BS with selective confirmation. Good “predictions” are lauded, while bad predictions are hand-waved away.

      1. +3 Well spoken. The Anal…..yst never seem to look at what makes Apple different.

        A USA Today article “Year after Jobs’ death, how high can Apple fly?” by Jon Swartz is a great hit piece. It just takes a bunch of items, looks at them from the negative to say Apple is doomed cause it cannot get much higher.

        You know, just like the articles that came out when Apple hit and dropped from $30, $ 100, $300, $500, etc.

        Apple is Doomed,,, Doomed I say.. One day it will crash and burn…… sell now…. (ps, sell now as I would like it to drop another $70 so I can buy more.) lol

      2. You can have great fun with charting. For instance:

        “The Apple [AAPL] stock chart has traced the dreaded a$$hole pattern. This is a well-known and well-followed asterisk exit pattern in traditional technical analysis that is generally closely followed by ejecta products,” Wreckedem Buttora reports for MarketWatch. “In Apple, the bottom of the pattern was formed when the price spiraled down and out of sight, leaving behind only trace residues.” Analysts are expecting frequent repetition of this pattern, very possibly on a daily basis.

  2. Reading some of the stuff that these analysts come out with I sometimes think a stock split would be a good idea because so many idiots seem to be scared of the big numbers Apple could/should be trading at in comparison to companies like Amazon. Split it in half, or even into three, then they can start talking up rises to 500+ again. As if the price alone means anything.

  3. Love this crap. Using a “technical analysis” approach they think you can predict the future price of a company’s stock by looking at a graph of where it’s been — instead of, you know, looking at where the company is going.

    1. But the problem lies within the system. Computers are the “traders” that contribute to these silly patterns. Computerized trading just looks at numbers then decides whether to sell or buy. They don’t look at the “bigger picture” that has propelled Apple to the top of the technological world. That’s where the real people come in and buy the stock because it’s a value and great investment.

      Right now the computers are just reacting to what the other computers are doing and this is causing AAPL to be sold for no apparently good reason. Eventually there will be a turnaround but you just have to be patient.

      The “head and shoulders” analysts talk a good game but the computers are the probem. And tangentially, the high-frequency trading programs are really problematic.

    2. Even though this stuff is theory trying to explain what might happen, it is based on a long history of trading patterns observed and if enough people believe in it, they reinforce the pattern. The rest of us just go with the flow and further reinforce it. Going against this type of trading pattern can make you poor in no time.

      1. That’s true,3l3c7ro…if enough people believe in charting and enough firms build charting triggers into their trading software, then those fallacious beliefs become self-fulfilling reality. It is human nature to seek patterns, even when the data does not contain any.

        Hindsight is another human comfort technique commonly used in the stock market. Everyone is eager to explain the stock market events that occurred yesterday. No one can reliably tell you specifics about what is going to happen in the future. Anyone who could do so would be so wealthy that they would not need to bother explaining it to you. The same reasoning applies to the “get rich like me” scammers. If they are already capable of making money hand-over-fist, then why charge you to learn their “method”?

        By staying long in a stock, you can ride through most of the rumor-based swings and charting nonsense.

  4. The goal here is to drive the stock down as far as they can in order to buy in. Then the brokers will get they clients to buy the stock again to raise the price up so they can make a profit.
    This apple long is up 700% since 2006 or so. Can’t see Wall Street matching that.

    1. Exactly! Just like the bozos at Motley Fool. Every article they put out is extremely negative about Apple. Their aim is to drive the price lower and influence the stock price.

  5. These are not analysts – they are chartists, and their “science” is about as reliable as studying frogs’ entrails. Good for a laugh, but only a fool would put any money on their ramblings.

  6. And there are also people who keep massive data on horse racing, such as time, temp, humidity, what the horse ate that day – in order to predict the outcome of races. These technical stock analyzers have the same luck.

    1. Actually, the horse racing stuff makes a bit more sense than the stock charting. You mentioned a few environmental factors that *might* actually affect a particular horse in a somewhat predictable manner, whereas the charting is utter hogwash.

  7. Just play the game. Ben Graham’s quote still applies today. There’s a lot of money to be made for those who stop complaining and start acting on the madness.

  8. This means that the smart longs have an opportunity to hitch onto the manipulation and idiotic chicken little’s fancy. Happy to buy Apple at low 6’s and a chance to buy a lot at anything less. Oh ye of little faith sell now but remember to save $600
    so you can buy 3( or 4?) of your friends an iPad mini before
    They are all gone. EVERYONE will want one, even those who have the full size will buy one just to have it.

  9. If there is a flaw in this analysis, its in the short period of time that the writer is analyzing. If, say, I make a trend of temperatures from August to December, I might say with strong conviction that global cooling is a fact. If I take the averages between 3 years, and in those 3 years it rose 1/2 a degree, I might have strong convictions that there is a global WARMING trend. But if I could analyze temperatures over centuries, or better still, millennia, I would see that there are cycles of warming and cooling, and while occasionally there are severe deviations, the trend returns to a certain place.

    The folly in the analysis at hand, is he is charting less than a MONTH AND A HALF from 8/20 to 10/1. Additionally, he is not comparing it to any other previous Apple product cycles. He is crying “GLOBAL COOLING” because it has gotten cooler in the last 5 weeks.

    Here is a graph showing AAPL from 1/1/2007 to present. It tells a different story. It would be very interesting to review the actual longterm trend with each product cycle.

  10. yeah, these pattern is always there every quarter before earnings
    report. those Wall Street analyeast get paid to these every quarter
    and the SEC can’t do anything about it, so disgusting upsetting
    useless

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