Talk about a Head and Shoulders formation - Apple

Discussion in 'Technical Analysis' started by TrustyJules, Nov 20, 2017.

  1. Sometimes - ever so rarely - a technical pattern appears that hypothetically seems to tick all the boxes. For simplicities sake I am showing the Apple chart of the last 3 months with just the closing prices:

    Even the volume seems to fit the classic H/S pattern - stronger on the left shoulder than the right and higher in the head than in the right shoulder. For those more used to OHLC format:


    Only one thing more is shown - that the right shoulder was actually filling a gap opened on the left shoulder. Does this invalidate the H/S? Not sure I read anything in the literature about that. If we take the H/S theory than AAPL is due to tank about 6$. Of course the real question you have to ask yourself is, am I a believer?

    Just kidding - I have taken the view that this is a real indicator in this case and predict a fall to at least 165$ but possibly to 155$ in the next 3 weeks.
    Chris Mac likes this.
  2. Chris Mac

    Chris Mac

    Hey Jules, good job !
    You are damn right, this is 100% a H&S, no doubt!
    Declining volumes and RSI during the right shoulder.
    Confirmed below 169.
    But as you may suppose, because of the timeframe, don't expect a great correction.
    I agree for the first target @165 dollars.
    But odds are high Apple would continue to fall until 161.
    In the graph below, you should notice Apple made new highs thx to MA50 (green curve and first circle).
    I suspect Apple to test again his MA50 @161 (second circle).
    Moreover, 161 is the former high, and tx to polarity, resistance becomes support.


    TrustyJules likes this.
  3. maxinger


    It appears to me like consolidation pattern.
    and AAPL is still uptrend.

    I don't consider it as SHS reveral pattern.
  4. Chris Mac

    Chris Mac

    Of course Apple is still in an uptrend.
    We are talking about a short term H&S (by the way SHS means nothing),
    a correction of 10% is normal in an uptrend.
    This is why I draw an uprising arrow to show the potential rebound.

  5. I concur the uptrend isnt broken - its just a drawback that is within certainly the longer trend. Here's a weekly apple chart:


    You will see it can fall back to 165 and even lower without breaking the uptrend. I only posted the chart because in my experience this is one of the clearest H/S patterns I ever saw. Usually there is always something wrong with it one way or the other. I did take a position in the market by buying some december 165 puts simply as a matter of principle. I mean if TA is supposed to give an edge surely this is it even if we are looking at a very modest draw down.
  6. ironchef


    Sorry, I just don't see any H/S pattern here. Can you educate me?
  7. The easiest way to see it is to look just at my first post and the top picture. There is a left shoulder around 1st November, a nice round head around the 9th of November and the right shoulder around the 17th. The volumes are also consistent with high volume on the left shoulder and decreasing on head and left.

    It struck me because its so rare to see something that fits theory so well. Hence my conclusion to act on it but of course the markets are always perverse. Here's the same chart with a few more days since my post:

    Now there is actually also a bullish pattern since with the two (ascending) bottoms on 15th and 20th. I think if the stock goes over 176$ the pattern definitely fails but its not 100%, If you look toward the middle bit of the chart there from sort of beginning of August to end September, there is also a h/s pattern but quite messed up but the stock eventually did retrace from 158$ to 148$ or thereabouts.

    Anyway - its funny that no matter how good something looks a kick in the teeth is never far off. :)
  8. ironchef


    I am trying to augment my trading method with chart reading so I am quite new to looking at charts. What is frustrating is the same chart can look different to different people and what looked like H/S to you looked like consolidation to maxinger and ascending triangle to me or a trend line to someone else? Of course one has to specify a time frame or the data can be misleading.

    One of my coaches here told me I needed to look at bar charts and the bars. You have any comments?
  9. maxinger


    You are right mister.
    different people look at charts differently.
    Position traders, swing traders, day traders look at chart differently because they use different timeframe to trade.
    Obviously fundmentalist hardly look at chart.

    I definitely prefer to look at candlesticks.
  10. ironchef


    So in the above example, what is the right pattern based on the time frame defined by the bar/candle?

    I used to trade based purely on FA by the way, not that accurate either, for short/medium time frame.

    #10     Nov 23, 2017