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Technical Alert: Classical Head and Shoulders Top Forming on Apple

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Expert explains: For the pattern to have import, you need heavier volume on the left shoulder, lighter volume on the head, and even lighter volume on the right shoulder.

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MINYANVILLE ORIGINAL Although I no longer practice the classical technical analysis craft, I have yet to see anyone write about the impending classical head and shoulders top forming on Apple (NASDAQ:AAPL) on the weekly time frame.

Yes, there was talk of it on the daily time frame a couple months back and interesting enough, most scoffed at it. Well, Apple dropped almost 200 points from the highs in a beeline fashion -- far more than was called for by the technical set-up. Now it is forming the same pattern on the intermediate term time frame. Will it mean anything this time around?

Here's a chart of the set-up with some overlays of neoclassical anchored support and resistance concepts. As you can see, anchored resistance isn't all that far away now.

(Charts courtesy of investools.com.)



According to Edwards and Magee who wrote the book on this pattern, volume is an important characteristic and I agree with their analysis in that respect. For the pattern to have import, you need heavier volume on the left shoulder, lighter volume on the head, and even lighter volume on the right shoulder. So far, that's the way it is setting up.

If this pattern does play out, according to the classical analysts, the measure of the move is equal to price difference between the top of the head to the neckline which in this case will end up being about $200. I don't agree with this way of measuring the projective move. My work has shown that utilizing percentage moves is far more valuable.
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