AAPL Trade Set-Up

Monday I posted, AAPL Update / Trade-Set-up / Bellwether which showed the 3C charts as well as the stops, the main difference between Monday's post and yesterday's AAPL Stopped Out other than the "Trending Stop" being hit, was the deterioration in the 60 min chart from 1 day to the very next.

As posted in AAPL Stopped Out yesterday as well as the post with the stops the day before, I had reminded you of how the Trend Channel works and what to expect after a stop out...

"Once we have a stop out that doesn't mean a higher move can't be made, in fact they often are, but the easy money of the trend is now done and it is very susceptible to a reversal. I've noticed over the years I'm almost always better off exiting the trade when the Trend Channel issues a stop out than trying to capture a few extra percent as there's usually a nasty surprise and the money can often be used in better performing assets as the reversal process, which AAPL's declining ROC already shows it to be in, is often a choppy, meat grinder and any additional gains are usually pure luck."

Along those lines I ended yesterday's stop out post with,

"I am not getting too much in to the intraday charts as there's usually more lateral slop, the one thing I will look for is any kind of resistance forming, IF YOU LOOK AT ALL OF THE BASE CHARTS ABOVE WITH POSITIVE DIVERGENCES FROM 8/1 TO 8/10, YOU'LL NOTICE A HEAD FAKE MOVE TO THE DOWNSIDE JUST BEFORE AAPL TAKES OFF TO THE UPSIDE, THE SAME IS TRUE OF A DOWNSIDE/TOP REVERSAL PROCESS, A MOVE ABOVE RESISTANCE JUST BEFORE A TURN TO THE DOWNSIDE IS HIGH PROBABILITY.

Therefore the 1-3 min charts will come in handy in such a situation. Beyond that I'll be setting price alerts for AAPL including downside moves , head fake moves as well as resistance/support areas like the 5-day moving average, the last high in 2012, the 10-day and 22 day moving average and the 50-bar 5 min and 30 min charts. I want to know about any significant technical moves as I'm looking at an entry at this point."

It was some of yesterday's price alerts that went off today alerting me to a possible set up in AAPL.

 This is the daily chart, it's not too hard to see why the Trend Channel that has held the entire trend since 8/8 was stopped out yesterday as AAPL starts to move lateral,

Also note the declining volume.

Here's the same on a 60 min chart.

And yesterday's stop out as the Trend Channel self-adjusts to changes in character that are outside a certain average and standard deviation of that average over recent trade. You can see the Channel turning to the right, which was less obvious Friday so I used a ROC indicator to show you.

 The 15 min chart is the main difference between yesterday and today, you can see "about" where it was yesterday , but a closer look reveals something that is not a surprise considering what I told you about behavior after a Trend Channel stop out.

 This is the same 15 min chart zoomed in, note the flat range in AAPL, I often say , "It's the quiet zones or flat trading ranges that see the most underlying activity making them dangerous as people fall in to complacency" 

Here we see a clear positive divegrence and even a head fake move at the yellow arrow on a break below support just before the reversal to the upside.

So far the 5 min chart is in line, 3C confirmation of the price trend , also note the slight head fake move (stop run) just before the upside move.

We'll need to see the 5, 10, 15 min charts go negative from here and we'll likely have an entry in AAPL, whether a better equity short or options entry remains to be seen, although if I were a long term position trader, I wouldn't have a problem starting a partial short position here as long as risk management allowed for plenty of room to add to the position, but this must be done BEFORE you enter the first share of the trade.

From this point, we have a new intraday move in AAPL and a new short term divegrence which means we have to go back to the fastest charts where any changes in the trend will be first seen. As of now the 3 min chart is in line as well, so the 5 min chart will not be negatively divegrence while the 3 min chart that is more sensitive to smaller moves is still in line.

The 2 min chart shows some last minute (what I use to call Market Maker or Specialist  front running as they typically filled the larger order that's about to move the stock) accumulation. We also see the first signs of 3C falling out of line with AAPL, although nothing to be too alarmed about yet, which means the more sensitive 1 min chart should also have some sort of negative divegrence.

It too sees last minute accumulation before the move up which happens to be on a head fake/stop run move intraday. There's 3C falling out of line here as well. The next move is for the 3 min chart to start to go negative and for the 1 and 2 min to worsen, this way we know we are getting close and can start to forecast what kind of move to look for and what kind of trade best suits the entry that is setting up.

I suspect since we are so close to new high resistance we'll see a move above $102.17 as this would be a new high/breakout and the breakout buyers usually expected to show up, although they were notably absent from SPX 2000 the last two days it hit the level.

I'll be setting alerts above this level and looking at 3C's performance as those levels are hit. I suspect this will make a good equity short entry as well as put position considering the new high.