Many of you have heard me say that I wouldn't short the first break from a H&S top as Technical Analysis teaches, in fact an even better TA entry i a break and a bounce to the former support that fail and shorting it there, I still wouldn't do that. This popular price pattern, long considered to be among the most reliable is traded the same way over and over and Wall St. uses that against technical traders and that is why we have the concept of the "Volatility shakeout". If we weren't able to get short AAPL at the top of the head where risk is very low, then we re usually better off waiting for the volatility shakeout that is quickly becoming as common as the H&S top itself, still traders make the same mistakes every time.
AAPL's H&S top breaks at the yellow arrow, although many will enter a H&S top short on the price formation, most will wait for confirmation, the break below the neckline at the yellow arrow; this is what I call, "Chasing price".
AAPL put in a strong hammer on increasing volume and that held as support the entire time, not once were those lows violated. This is when we started planning for the volatility shakeout and today price moved right to the neckline and closed just off the highs on increasing volume. What we want to see is a strong move above the neckline that scares shorts in to covering, sending AAPL up more, that's hen we want to start looking for a position on the short side, we'll let the market and AAPL tell us when, but so far, the concept has held and worked perfectly.
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