AAPL Weekly and Daily Charts Head and Shoulders (H&S) Pattern Fibonacci Retracements

We watched the top form in AAPL with the negative divergence (red lines) that created the spank down off the top three weeks ago.  The red bars on the daily chart show the H&S now in play. The neck line at 660 failed on Monday. The head is 705 so this targets the 615-620 area.  A back kiss of the 660 would be expected before the H&S plays out but intraday yesterday price almost came down to satisfy the lower target.  Note the indicators on the daily chart all with weak and bleak profiles, downward-sloping lines, that want to see lower lows in price regardless of whether a dead cat bounce occurs, or not. The 50-day MA is at 658 which is at the neckline area as well so this confluence will act as a magnet if price comes up for the back test.

Staying on the daily chart, the blue lines show the Fibonacci retracements; note the price action directly at the 38% retracement at 636-ish. Also of interest is the 50% Fib that is 616-ish exactly at the H&S target. Further, these two tools also form a confluence with the strong horizontal S/R from July and early August. Therefore, the 615-620 area is a superconducting magnet that will want to pull price in for a test. Note the strong volume over the last few days of selling, the rats were jumping from the sinking ship.

Moving to the intermediate and longer term time frame, the weekly chart is nasty as pointed out by Keystone several times over the last month. Overbot conditions, the red rising wedge and the firm strong negative divergence for the indicators (red lines) smacked price south off the top. The 20-week MA at 625 is very important support.  The blue squares show how price respects the 20-week MA strongly. A failure of the 20-week MA is major trouble for Apple and you will not want to be on the long side of this one anymore if that occurs. The Fibonacci retracements show the 38% Fib at 520, which forms a confluence with strong S/R action from earlier this year. The neon green lines show a potential long term H&S forming. The pattern only has a left shoulder and head right now, the neck line is the 520 level. As the weeks play out, and should 520 fail, AAPL will be headed towards 340; note the strong landing zone at 325-365. But this is a long ways away, first price will need to drop to 520-600, then back up to form the right shoulder at 560-630, then down to the neckline at 520, and then failure placing the long-term H&S in play into and thru 2013.

The effects of Apple weakness on the broad indexes will be strong. AAPL is 20% of the Nasdaq Index and makes up a major part of the SPX as well.  When AAPL jumped earlier this year, it was all wine and roses for the markets but now begins the divorce.  The negative impact on the markets could be epic.  Traders will not be willing to give up huge profits gained in AAPL so as price drops the acceleration downwards could prove dramatic. Watch the 20-week MA support.  An ideal bounce point would be the 615-618 price. A back test of the neck line and 50-day MA at 660 could happen in a heartbeat. Overall, the charts are very weak and expecting lower prices moving forward. The 660 back test, should it occur, would likely provide another nice short entry opportunity. Thus, a projection would be a bounce from 615-618 to perform a back test of 660, then failure, heading lower falling thru the 615-625 support zone, then traveling to 520 as the weeks and months tick by likely forming a long term H&S pattern. Apple has and continues to touch all our lives on a daily basis, but, this game is moving into the late innings. This information is for educational and entertainment purposes only.  Do not invest based on anything you read or view here.  Consult your financial advisor before making any investment decision.