Can AAPL perform a respectable retracement?by Kathy Garber : Wednesday 06:30:30 CT
Apple, Education, Structural Trading, The Opening Print
The end of 2013 rejection of 575.14 created a pullback, forming a retracement attempt of a double bearish harmonic pattern completion. Can this retracement be respectable?
Failure to retrace a harmonic pattern 38.2%, especially a double pattern, is what I call an embarrassing retracement. After all, harmonic pattern rotations require a minimum of 38.2%, so when price cannot at least get to that Fibonacci level, it’s embarrassing to a reversal pattern. I exaggerate, of course — failure to have a harmonic pattern leg requirement met is an excellent clue for the directional bias continuation, in this case to the upside.
The daily chart shows the double bearish PRZ (Potential Reversal Zone, aka a harmonic pattern’s completion target) was topped at 569.88, there was a breach, but the fact that price held below the 569.88 was the initial clue of a retracement attempt. Since the two harmonic patterns were derived from two totally different starting points, their individual minimum retracement targets are not the same.
The smaller pattern, the blue Bearish Crab, has its ideal minimum retracement target at 526.27, almost got there but no cigar, the lowest price has fallen is 529.88. Now I’ve been asked if I would consider that close enough and my answer in regards to a 38.2% target is no, because this is the minimum requirement for a harmonic pattern’s leg and I tend to look at this ratio as a necessity to at least get there, similar to a gap — I don’t consider it filled unless it’s tagged at the exact level. This is my preferred way to look at gaps and harmonic pattern rotation.
The larger pattern, the green Bearish Bat, ideal minimum retracement target is 502.54. This correlates with the smaller pattern’s 61.8% retracement target, so it behaves like a magnet if price holds below 526.27.
There is negative momentum divergence as well as an attempt to invalidate a bullish cross, so price is really at an interesting juncture, with initial key levels to break and hold (key is “and hold” part) beyond either 550.76 or 526.27. Until this can occur, price is stuck in a sideways range.
A hold above 550.76 continues to validate the bullish cross that occurred in July 2013, and is also a retest of the double PRZ. A hold above the PRZ or previous high of 575.14 offers a long opportunity to higher harmonic pattern PRZ’s, namely 620.76, 668.59 and 722.53, and there are points of interest at 593.65 and 705.07.
A hold below 526.27 invalidates the bullish cross has increases the probability of retracement mode, this offers a short opportunity to the ideal target of 100% retracements at 447.22 and 385.10 with points of interest or scaling points at 502.54 and 457.70.
So Apple, orange ya going to have a respectable retracement? Yeah, I know, corny, but couldn’t resist.