Apple has surged to new all time highs recently hitting 119.48. From these levels it has made a 5 wave sequence lower to 109.35 (a $10.4 move).
Currently Apple looks to be in a corrective phase higher as noted by the A-B-C labels.
Trade set up:
I expect to see a 5 wave structured rally to complete the C wave taking the stock into the sell zone identified between 117.18 - 117.45. This sell zone also coincides with the 76.4% fib retracement of the initial move off the recent historical highs.
Looking at an A=C relationship in the correction the correction would be predicted to end near 116.82.
IF the stock reaches these target sell zones, I am looking to short the stock (I will be using options, but for illustration here I will detail using futures) with a stop loss at 119.8 (just above the historical highs) with an initial price target of 106.9.
The reason I say initial:
1. I will manage the trade depending on how it develops, if it looks like bearish momentum explodes I will let it run lower.
2. 106.9 is calculated by taking an average entry price of 117.30 and taking away $10.4 (the same length of the recent declines)
Personally I think Apple is about to enter a major sell off as a result of:
1. Profit taking from institutional investors.
2. Recent developments at Apple including problems with Apple Pay in Europe
3. My skepticism over the predicted success of some future apple products (Apple watch)
4. Over bullishness from analysts on this stock (www.marketwatch.com/...APL/analystestimates)
When I say "over bullishness" I mean that there seems to be a very strong consensus amongst analysts from the link I published above. I believe this could be a sign of crowd psychology acting as opposed to fundamentals. And being a natural contrarian, I will always look (not necessarily act) at the other side when there is such a clear consensus.
At the time of publishing this chart, the results from Analyst recommendations on MarketWatch for this stock were:
BUY 33
OVERWEIGHT 5
HOLD 11
UNDERWEIGHT 0
SELL 2
Currently Apple looks to be in a corrective phase higher as noted by the A-B-C labels.
Trade set up:
I expect to see a 5 wave structured rally to complete the C wave taking the stock into the sell zone identified between 117.18 - 117.45. This sell zone also coincides with the 76.4% fib retracement of the initial move off the recent historical highs.
Looking at an A=C relationship in the correction the correction would be predicted to end near 116.82.
IF the stock reaches these target sell zones, I am looking to short the stock (I will be using options, but for illustration here I will detail using futures) with a stop loss at 119.8 (just above the historical highs) with an initial price target of 106.9.
The reason I say initial:
1. I will manage the trade depending on how it develops, if it looks like bearish momentum explodes I will let it run lower.
2. 106.9 is calculated by taking an average entry price of 117.30 and taking away $10.4 (the same length of the recent declines)
Personally I think Apple is about to enter a major sell off as a result of:
1. Profit taking from institutional investors.
2. Recent developments at Apple including problems with Apple Pay in Europe
3. My skepticism over the predicted success of some future apple products (Apple watch)
4. Over bullishness from analysts on this stock (www.marketwatch.com/...APL/analystestimates)
When I say "over bullishness" I mean that there seems to be a very strong consensus amongst analysts from the link I published above. I believe this could be a sign of crowd psychology acting as opposed to fundamentals. And being a natural contrarian, I will always look (not necessarily act) at the other side when there is such a clear consensus.
At the time of publishing this chart, the results from Analyst recommendations on MarketWatch for this stock were:
BUY 33
OVERWEIGHT 5
HOLD 11
UNDERWEIGHT 0
SELL 2