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.
As shown on the chart, the pattern consists of a left shoulder, a head, and a right shoulder. 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. Please see “Dangerous Apple chart pattern into iPhone 5 launch.”
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 Apple, after the head formation, there was another reaction rally that peaked lower than the top of the head and formed the right shoulder.
The line on the chart connecting the bottom of the left shoulder, the head and the right shoulder is known as the neck line.
In traditional technical analysis, when Apple price broke the neck line, it confirmed the top.
Relax, not many technicians are rich
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. Do you know a technician who has become rich by consistently generating profits in the market? If your answer is ‘no’, I need not say more.
Relax, the target isn’t far
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…Read more at MarketWatch
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