Setting Up a Bollinger Band Squeeze and Triangle Play in Apple AAPL

Mar 20, 2014: 12:04 PM CST

While most traders have gone cold on Apple (AAPL) – understandably so – it may be worth your time to take another look at this tightly compressed stock that may be setting up a breakout event.

Let’s start with a Bollinger Band “Squeeze Play” Chart of Apple:

Apple AAPL Bollinger Band Squeeze Breakout Trading Tactics %B

I drew a grey rectangle around the “Value Area” or multi-month sideways price action in Apple shares.

Current “potential price breakout” boundaries exist near $515 per share (support) and $540 (resistance).

Note the similar set-up or pattern that took place in November 2013.

I also highlighted prior “Bollinger Band Squeeze” set-ups or visual compressions (tightening/narrowing) of the standard Bollinger Band indicator.

The “Bollinger Band Width” indicator simply displays the price difference between the upper and lower band.

You can see that volatility – or price movement – is cyclical and tends to alternate between periods of range compression/contraction (like now) and range expansion or breakout impulse movements.

Using this logic, we can watch Apple shares for a potential “Breakout” or Squeeze Play on a breakout beyond the current boundaries.

When setting up a breakout event, we prefer to be neutral (not trying to predict which direction price will break) but instead look for a continuation move on a breakout trigger.

Immediate upside breakout targets include the prior high near $555/$560 while downside impulse targets include $490 (simple level planning).

To make matters more interesting, Apple shares are forming another intraday Triangle Pattern:

Apple AAPL Intraday Triangle Price Pattern Trading

Shares formed a similar compression or triangle pattern in early January ahead of a large downside gap impulse.

The breakout event wasn’t tradable from this perspective, as price gapped into the target ($500) without a trigger-break beyond the lower trendline.

For now, intraday traders have both a short-term Fibonacci Grid ($523, $532, and $541) for reference along with the compressing ‘triangle’ price trendlines I drew that intersect the $525 and $535 price levels.

Continue watching these levels – and the higher frame rectangle trendlines – for any sign (and opportunity to trade) a break free of the $530 magnet “Value Area.”

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Corey Rosenbloom, CMT
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