Apple (AAPL) has been a market leader and the tech sector leader for a very long time. It has been dominant in its rise off the March bottom. A market leader is often looked at as a “tell”, as to the direction of the overall market. Often, a market “tell” turns up first, and fades first, in front of the market or sector that it leads. I believe that the theory behind a “tell”, is that the smartest traders trade the most active stocks. So when a “tell” starts to lag the rest of the market, the smart traders are exiting, signaling that an impending pull back in the market is likely to follow.

Looking at the daily chart of Apple we have numerous indicators that the market is ripe for a pull back. In fact, if Apple is a “tell”, the completed five wave count up on May 14th says that the general market is in overtime. Notice that the 1:1 ratio completed on May 7th, also a confluence with the 0.810 Fibonacci ratio. This is an extremely high retracement level to reach without a significant pullback. This behavior is mostly found in second waves, or B waves, assuming the primary direction of the trend is still down.


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The RSI is diverging from price, which I have highlighted in orange. I find it interesting that the divergence started exactly when the ratio and Fibonacci level was reached, highlighted by a vertical line on the chart. As an additional point of interest, notice when the other pull backs occurred, at the 0.500 and 0.618 retracement levels. The RSI also came close to the 78 level at this same juncture, which has been the highest RSI level attained by Apple since June of 2007. It has attained this level five times since then, and each time a correction followed.

Another indicator is how price is starting to fade away from the flattening upper Bollinger band that it has hugged for quite some time. This is a reliable indicator of a probable pullback.

Let’s zoom in on a 15 minute chart and see if we can get additional clues about what might be going on. On a fifteen minute chart I get a pretty clean 5 wave count down from the high. If my count is correct, and I believe it is, then a rule of the Elliott wave principle is that five waves never occur alone (except in flats).


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On the 60 minute chart, I have projected the most direct path price could take to complete another five waves down. It doesn’t have to complete the pattern exactly like this. It could meander sideways for awhile instead. But, based on the five wave count down from the high, price will at least tag 184, again, and probably go lower. The more common price targets, based on Fibonacci ratio analysis, are shown by the lines drawn. They are 182 or 177.


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The first bounce could occur at 187.00 or 185.70.