Just another AAPL knife catcher

apple swing setup

apple swing setup


Weekly $AAPL chart. Few things to note here:

1. I cannot even find when we had 7 red, almost all closing on dead lows, weekly candles in a row. Just some real nasty professional selling taking place recently.

2. Notice how far we are stretched from the moving averages. Even when we were going parabolic to the upside we did not manage to pull away from the 8EMA so far. Stocks do not fall in a straight line and this is about as straight as it gets.

3. Third and what I consider most important is the size of this weeks candle. Often when you see a candle of this size forming after a prolong downtrend it often signals a potential sell climax, at least for the short term. Combine this range expansion final candle with heavy volume and we are looking at a good bounce candidate.

Important to note, there is nothing here that says we have to bounce soon. In fact, there is nothing stopping us from putting in another 50+ points of downside in a straight line. However at some point there will be a snap back mean reverting retracement and that is what lures in the knife catchers such as myself.

Have a plan, recognize an opportunity, and most importantly manage risk. I picked up a SMALL position at the close today at 537.75 that I will add to as price moves against me. [EDIT: 7:08 AM, sold pre-market at 537.12 should be able to pick up initial piece entry lower this morning, hopefully low 530s] I am fully aware I may be early to the bounce party and I will plan to trade around this core swing position, tactically cost average down every 5 points or so selling my add-ons on bounces.

low 520s are an obvious spot to bounce, below there we have the 61.8 around 500 and then trend line support about 485, which would put apple about a cool 30% off the highs in just a few short months.

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Evan Medeiros

Evan is the founder of the Trade Risk. With 25 years of coding experience and a B.S. in computer science, Evan brings a systematic discipline to investing in the stock market.

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