Compression Continues as Breakout Beckons in Apple AAPL

Oct 2, 2014: 3:13 PM CST

Apple shares (AAPL) continue their triangle or “EMA Compression” pattern as we await an official breakout trade entry trigger.

Let’s update our “Triangle Trade” chart from last week and focus on the key trigger-entry levels along with the potential targets to paly for should an actual breakout occur soon.

We’ll start with the daily chart:

Again, see last week’s post as the Triangle was developing (the triangle pattern continues for shares).

The Daily Chart simply highlights a compression of price between the 20 and 50 EMA as price plays ping-pong between these two indicators.

Officially, the falling 20 day EMA intersects $100.30 while the rising 50 day EMA plays at $98.70.  Note how buyers and sellers have used these levels as short-term pivots.

A simple breakdown impulse under the $98.00 per share level opens a “sell pathway” toward the prior lows at the $94.00 per share level.

The divergences and distribution volume hint that this outcome may be favored for shares.

However, a pro-trend continuation breakout trigger beyond the $101.00 level suggests that price can rally toward the $104.00 prior high and perhaps even beyond that on a true trend continuation movement.

We can see the price pattern (triangle) clearer on the lower frame:

The hourly chart – in this case a compressed two-hour chart – shows the dominant price pattern – that of a Symmetrical Triangle or compression pattern developing as drawn.

The lower support line intersects today’s low (where buyers defended) at the $98.00 per share level and shares trade directly in the middle of the pattern at the $100 per share “round number” reference.

The main idea is that we should continue to remain neutral on Apple shares as price plays “ping-pong” between these two converging price-based trendlines.

A breakdown under $98.00 triggers a potential liquidation breakdown (targeting $94.00) while a breakout above $101.50 continues the uptrend and suggests $103.50 to $104.00 may be in play as upside targets.

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Corey Rosenbloom, CMT
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