Hi traders.
Apple appears to have made a top and prepares to break down.
What is happening?
The green count has completed a wave 5. Wave 3 and 5 are extended to the maximum but fit perfectly into the ratios. If traders interpret the formation as an ending diagonal or triangle, their positions are now trapped because point E is not reached. Make sure to use the Log chart, so the trend lines make sense.
How to trade it?
The idea is to short AAPL from here, because we assume that we are beginning the wave 3 of C, a strong impulse wave. If our assumption is correct, this wave builds enough momentum to break through the support. The long positions will hit their SL here, resulting in further supply.
If this is not an ABC of a wave 4, this could be the beginning of a large multi-year correction. In that case we can still short it from here as price would just begin a wave 3 of 1. We could basically hold this short for the foreseeable future.
Where do we go from here?
The first target is $109, because it is the length of wave A. If we break through this level, the next target is at the green box. It is the 1.618 extension of wave A. Traders might see a H&S formation, and the target is slightly above our second target - the upper line of the green box. You could also just set the SL to breakeven and hold the short open-end if you speculate on the big correction.
What if not?
If price bounces from the support here, it is likely to continue ranging inside the wedge - and potentially test the upper line of the wedge, which would result in a new ATH.
Happy trading!
Apple appears to have made a top and prepares to break down.
What is happening?
The green count has completed a wave 5. Wave 3 and 5 are extended to the maximum but fit perfectly into the ratios. If traders interpret the formation as an ending diagonal or triangle, their positions are now trapped because point E is not reached. Make sure to use the Log chart, so the trend lines make sense.
How to trade it?
The idea is to short AAPL from here, because we assume that we are beginning the wave 3 of C, a strong impulse wave. If our assumption is correct, this wave builds enough momentum to break through the support. The long positions will hit their SL here, resulting in further supply.
If this is not an ABC of a wave 4, this could be the beginning of a large multi-year correction. In that case we can still short it from here as price would just begin a wave 3 of 1. We could basically hold this short for the foreseeable future.
Where do we go from here?
The first target is $109, because it is the length of wave A. If we break through this level, the next target is at the green box. It is the 1.618 extension of wave A. Traders might see a H&S formation, and the target is slightly above our second target - the upper line of the green box. You could also just set the SL to breakeven and hold the short open-end if you speculate on the big correction.
What if not?
If price bounces from the support here, it is likely to continue ranging inside the wedge - and potentially test the upper line of the wedge, which would result in a new ATH.
Happy trading!