Even if you aren't interested in AAPL, I think there are some good concepts that the AAPL charts relay.
On Friday I started an Out of the Money Put in AAPL to try something different as I usually prefer in the money. The position was 50% to have some coverage going in to an uncertain weekend, but left enough room for higher prices which is what I expected. I believe if you look at the charts you'll understand why higher prices were in my opinion, a good bet. Please do keep in mind the severity of divergences all over the market, not just AAPL, the $AUD Carry Trade being turned off (institutional money is closing the carry trade they use to finance purchases and rallies) and keep in mind the hedge fund redemption situation which may be one of the worst in the history of hedge funds. Finally keep in mind what happened when Paulson's Advantage Plus fund returned a roughly 50% loss last year and how his only profitable position in his top 5 holdings was GLD, then look at GLD through the month of December right before redemptions came due at the new year, that's what 1 hedge fund can do to a stock to meet redemptions, AAPL happens to be the largest institutional/hedge fund holding, imagine what a pack like that could do with 89% under-performing the SPX and redemptions starting as early as September.
Now the charts, but please keep in mind what the situation is, what history tells us and try to think like a fund manager who would rather be part of the 89% under-performing group than the bottom 10%, this is why hedge funds all buy the same stuff, herd together, you wouldn't want to take any risks either and probably be content hanging with the crowd if you multi-million (some hundreds of millions) job was on the line, it's a lot easier to justify why your under-performance is on par with most funds than it is to explain why you were taking chances and ended up under-performing the herd.
Understanding these dynamics gives you a different perspective when looking at the charts.
Take a look at AAPL's volume...
A closer look reveals that volume was falling way off, there was a large accumulation zone at the May lows, but nothing like it since, it's as if the shares were accumulated and sold over the course of months, but volume started running out, demand for AAPL shares in the size institutions needed to sell dried up. At the white arrow is the concept of a bullish reversal candle on high volume, this is almost ALWAYS a reversal sign 9same for bearish candles and high volume and on any timeframe). In August volume fell way below the 50 day average, only after AAPL crossed above resistance and the psychological $600 (century mark) did volume pick up, then it picked up much more in to the triangle that formed and broke out (larger of the two) which formed right above the move above the April highs to all time new highs.
Look how volume falls off until resistance levels and price patterns are broken, this is what brings in retail buyers, this is what is needed to sell large positions, demand and higher prices (which go hand in hand). Every time volume fell off, there was a breakout move.
This is why I'm betting that the smaller, most recent triangle sees a break out move, that's where I want to add the second half of Friday's put position.
Look at volume on the breakout of the larger triangle, price looked wobbly this morning, but I stayed patient betting it will move higher, for institutional money, they need demand to move higher even more than they need price to move higher.
On the 1 min chart there was a very small positive divergence, I believe it is there to form the triangle and as the triangle becomes apparent, buyers step in as some will buy the bullish price formation. Others will wait for the breakout, the majority will wait for the breakout.
Look at the distribution on the 2 min chart as the large triangle is formed and then how it gets worse on the breakout from the triangle.
The 3 min chart shows distribution as the apex of the large triangle takes shape (meaning it is closer to the breakout move-this use to be where I'd buy too), after the breakout distribution is even worse as volume/demand rise.
On a 5 min chart distribution is apparent, but only makes new leading negative lows after breakouts above levels like $600, resistance and the large triangle price pattern.
The 15 min chart shows 3C momentum to the downside pick up as volume picks up-look at the charts above with volume, this is the door that is open.
The 30 min chart shows the initial break in AAPL which was sharp and where the core AAPL short was initiated, you also see the heavy accumulation at the May lows, distribution on the move above the century mark/$600 psychological level and recent leading negative 30 min divergences at the triangles.
The 60 min chart goes deeply leading negative on the breakout from the last large triangle.
Looking at the VERY big picture, this is the FIRST TIME SINCE 1985 that AAPL has gone negative on a weekly chart, you can see multiple large accumulation areas, the last being 2009, since then not only negative, but leading negative on a weekly chart.
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