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