AAPL Calls and a 3C example

The AAPL Call trade is in the green and still open.

A member who also uses 3C sent an end of day email trying to better understand how to interpret the AAPL 3C signals, I thought it was an interesting question and answer that some of you may be interested in, so here's the email response from me and the charts I'll add to this post.

Divergences start on the shortest timeframe usually (unless there was a decent chunk of accumulation and one of the longer timeframes caught it at exactly the right time). If a divergence, buying or selling, is strong enough, it moves to the next longest timeframe and so on and so forth. So we watched AAPL today move from intraday charts in the 1-3 min range to the 5 min and at that point right before the move there was a stronger signal in the 5 min chart, a leading positive divergence (leading divergences are the strongest and often found near the end of an accumulation or distribution phase). So basically looking at AAPL only and today only, the positive divergence built out to the 5 min timeframe.

Here are the 2, 3 and 5 min charts as they developed at 1:45 and 2:45 today for AAPL...

 AAPL 2 min chart is in a leading positive divergence, 3C is making a second higher high as price is flat or even lower than the previous positive divergence earlier in the day.

This strength migrates to the next timeframe, which will not look as strong, but the longer the timeframe, the more important the divergence.

 The 3 min chart is also making its second higher high, but it has not quite made that higher high, still it is positive.

The strength here has migrated to a more important chart, the 5 min which is the first timeframe where we typically see institutional activity.

 Here there's less detail, but the trend is clear.

Now at 2:45 today...

 The 2 min chart is now making its 3rd higher high, the divergence is growing stronger as the day moves on.

 The 3 min chart is also moving to make a 3rd higher high in a flat price range.

The 5 min chart is now even higher, it has less detail as it should, but the divergence had enough strength to migrate through the timeframes.

This is what the 5 min chart looked like at the end of day.

Now back to the email...

The negative on the 1 min is showing there's no confirmation and the signal is telling us there's distribution in to both demand and higher prices, the two things institutional money needs to move around (or on the flip side they need supply and lower prices for accumulation).

This is what the 1 min chart looked like as AAPL rallied this afternoon...

Note that not only is the 1 min chart not following price higher, it's actually making a lower 3C reading and then a new leading negative low, back to the email....

I'm guessing that the 5 min signal is strong enough that they still have some selling to do, although it's hard to say as that 1 min chart didn't budge(move higher). The charts past 1 min (like the 2 or 3 min) don't matter unless the divergence from the 1 min is strong enough that it migrates to those longer timeframes which it didn't. Right now they are just moving in confirmation as they should until something bigger shows up there. My gut feeling here (and I hate when they run these plays so late in the day like last Friday, but that's when they come out and play) there's probably more distribution to go (meaning there's probably more upside in AAPL).