I am looking forward to the hate mail and tweets on this one. However, unlike those that will attack me, I will tell you where I am wrong. We’ll get to that in a minute, so hear me out.
Back in Sept and October some of my earliest posts on this blog I was bearish AAPL. We got a move down to the flash crash low and the stock bottomed.
At that point in February I made a bullish call on AAPL. There were signs of a bottom in the price action as the stock was making a higher low.
I had a 105ish target and took profits there. From there, I sat and waited for the next trade that would fit my criteria.
That next trade is setting up here now and I believe the stock can go to $80.
WHEN AM I WRONG?
I will start off by telling you I will likely be wrong if the stock gets back above the trendline and it becomes support.
There I would re-evaluate my thesis. So using today’s close, we are talking about risking $4 to make 30. We’ll take that risk reward all day long particularly with the price action we are seeing here.
In fact, I probably would not want to be short above 110.50, so keep risk even lower.
So let’s Review my thesis.
First the Price action under the surface is distributing.
We see a clear H&S pattern on the 15 min chart. This is the first sign of trouble.
Second the AAPL rally has stalled at 2 significant places.
1) A slanted H&S neckline
2) The 61.8 Fib from the prior down move of November 2015 to Feb 2016
Those are both significant areas for sellers to step in, and they are doing so.
Here is how I will trade this. Get a good short entry on the lower time frame and hold into the 61.8 Fib from Feb low to April High. That area is at 99.62. With round number of 100 in that area, I expect that area to be fought over, but we shall see.
If it can drop through there, the Beb lows become in play and below there the 161.8 Fib of the Feb low to April high. that is at 80.
80 also coincidentally lines up with the H&S measured move. I think we see $80