Today, I briefly want to cover Apple. There are some excellent setups on the tech giant’s stock chart – further proof that my trading methods can be applied to equities as well as macro markets.
In my post of 10 July (I’ve spotted a problem facing four stock market darlings), I noted that Apple had very probably topped off a large five wave pattern, and was in the process of turning down. On the chart I showed, my tramlines were excellent, and had all the features I like to see – multiple accurate touch points and a prior pivot point (PPP) on at least one tramline:
Not only that, but the entire rally off the 2013 low is a classic five-up with wave 3 containing its own five-wave impulse pattern (in green).
The day before I showed that chart, the market had broken the lower tramline. That was the first major signal that the trend had very probably turned down. It was a warning to investors that the Apple story was likely to become less one-sidedly bullish.
On the close-up chart last month, I saw a wedge had formed at the highs, lending support to the idea that the trend was changing:
But there was one more surprise in store. The market attempted one more thrust up but was hit by heavy selling again at the 133 highs before peeling away very hard. This is the updated chart:
From that last hurrah, the market has been in virtual freefall. There was some support at the 120 level, but that was brushed aside and the market closed yesterday at the 114 level – down about 15% off its 133 high. The next area of support is at T3, my third tramline (see the Dow chart later).
The severity of the decline and the wave count are not good omens for Apple investors.
Back to the Dow – and a perfect trade setup
OK, back to more familiar territory – the Dow. On Monday, I left you with an intriguing setup on the hourly. I had a textbook five down, three up scenario. Remember, the five down means the one larger trend is down, and the three up (with momentum divergence) is counter-trend. The implication is clear – the market will soon begin another leg down.
In fact, this ‘five down three up’ (or ‘five up three down’ in a bull market) is one of my favourite trade setups.
Sure enough, the market respected the initial tramline break, kissed the tramline and performed a ‘scalded-cat bounce’ down. That was confirmation the tramline was now a line of strong resistance. Then the market broke the first target T3, rallied around it in an A-B-C [pattern (in green) with the C wave kissing T3 and then broke down to T4, the second target. It is currently testing this support.
Once again, this market is demonstrating that my tramlines are important lines of support or resistance and can be used to set price targets where profits can be taken.