AAPL Weekly Chart Head and Shoulders Pattern Developing

AAPL dropped 5% yesterday and is down 8% thus far this week. Yesterday was the largest drop in four years. We watched this chart a week or two ago and the weak and bleak profiles for the indicators pointed to lower prices ahead. The MACD line and money flow continue to show weak and bleak profiles in the couple-month time frame so after a bounce occurs, price will want to come back down again.  The bounce will occur once Apple prints 520-ish, a comparable low to one-month ago, and the positive divergence shown by the neon green lines, remains in place.  The daily chart clearly shows positive divergence developing and will be locked in place once price drops another twenty bucks. The daily chart also shows the 50-day MA dropping down towards the 200-day MA which would result in the Death Cross but that chart can be posted once the death cross occurs.

Note the importance of the 520 support, which also serves as the neckline for the H&S. The head at 705, and neck at 520 is 185 points difference, thus, 335 is the downside target should the 520 neckline fail (520-185 = 335). Note the strong support area at 300-350 which provides a future landing zone. The 350 - 420 sideways channel area is also a future target. Note that the action over the last couple weeks does create a right shoulder already, a skinny one but a right shoulder nonetheless. Therefore, price may choose to collapse thru 520 where all Hades will break loose for Apple. Price will easily target 480 at that time (Keystone's 80/20 rule where 2's lead to 8's) and the neckline failure would signal major trouble ahead.

The future does not appear bright for Apple. A near-term bounce can occur once price tests 520 but stay aware that failure may occur as well. Use the daily chart's positive divergence, should it remain, as the guide.  Moving into and thru 2013, AAPL targets are 520, 450, 420, 350, 335, 320 and 300. Apple bulls must hold 520 at all costs, if she fails, hang on tight since more dramatic downside will occur ahead with targets at 480 and 450 on tap. 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.