"All human activities have three distinctive features: pattern, time and ratio - all of which observe the Fibonacci Summation Series" (R.N. Elliott - "Nature's Law - the Secret of the Universe" - 1946)

Wednesday, January 16, 2013

Misleading pattern for SPX, clearer for AAPL

I wrote a few posts ago that the pattern in progress was strange and did not convince me, and I still confirm this.
Yesterday I was expecting a decisive break (out or down), that has not happened; 
now to make reasonable counts becomes ever more difficult  because we are too far to consider valid labeling of minuette and sub-minuette degree without a completion of a wave of minute degree.
I wait the next move to understand where we could be; there are too many alternatives (no really with a plausible count).

Instead, now there are no more doubts, Apple (AAPL) broke the neckline of the bearish Head and Shoulders pattern on Monday with a gap down movement in rising volume, confirmed yesterday by a heavy black candle (-3.15%) with even higher volume.

For fundamentalists, the decline of the last session is explained by the negative reports of Nomura about estimates of iPhone sales that appears lower than expected, which led to the strategist for a cut profits by 5% over fiscal year 2013 and 8 % on 2014 (Apple fiscal year ends in September); Nomura sees a fair value of Apple  between 400 and 660 (!)

We know that fundamental analysis generally has little value for trading (what is the sense of a "fair value" range where, from the high (660) to the low (400), there is 40% of difference?!?), and moves in lagging (from the top of the right shoulder stock has already fallen by almost 20%), but the trend of Apple puts a little apprehension on NASDAQ and the "ballast risk" is high.

I have already analyzed AAPL over a month ago and last Saturday, and according to the Elliott Wave Principle, my outlook was bearish so I'm not surprised of the fall.

But , if someone asked me why I did not go short, well one thing is to assume a stock drop (as important as Apple) another thing is short it when the underlying trend of the market is bullish; it is against my trading rules go against the trend.

Prospects? The first target is to 428, the 38.2% Fibonacci retracement of the previous bullish wave and the level at which an important breakaway gap up is closed, but before getting to these levels, prices will meet the bullish uptrendline of the long wave started in April 2003 and if I will not see a reaction, here, I'd be very surprised.

* chart replaced at 9:50 am because the notes in the yellow boxes were in Italian and not in English; I apologize for the mistake

Have a great trading day...with much care!!!


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