Fibonacci Confluence in Apple AAPL with Target

Apr 13, 2009: 3:45 PM CST

I love drawing Fibonacci Confluence grids using a specific methodology on charts to get a better feel for possible support and resistance, particuarly after a big move.  I wanted to share this Fibonacci Confluence Grid chart of Apple (AAPL) with you to note a rare triple-level of Fibonacci Confluence at the $127.50 level which should be interesting if bulls can continue pressing the stock to that level.  Let’s see it.

(click for full-sized chart)

The Method is to start with a significant price high and then draw Fibonacci grids backwards to logical/meaningful prior support levels and then note the resulting Fibonacci grids that form.  You can’t just start drawing grids and hope to find something – think about why you’re drawing retracement grids and why certain price levels (of support) might be more meaningful than others.

I’ve colored the respective 38.2% retracements as Green; the 50.0% retracements as Blue; and the 61.8% levels as Red for ease of identification.

The first thing that should stand out at you is that price formed a 3-wave ABC retracement that found key support at the 61.8% retracement from the 2003 lows to the 2007 price highs – long-term retracements carry far more weight than short-term retracements.

The next thing that should jump out at you is the triple-Fibonacci confluence (which I’ve highlighted) at the $127.50 level.  This level represents the long-term 38.2% retracement of the 2003 lows, medium term 50.0% retracement (off the 2006 lows), and short-term 61.8% retracement off the 2007 lows.

Fibonacci Confluence is more important than single grids (or retracements) because you most likely have more people paying attention who would be missing other retracements, but would be paying attention to certain levels.  For example, a longer-term trader may be paying attention to the 38.2% retracement but miss the short-term 61.8% retracement, and vice-versa.  A short-term trader might not be aware of long-term retracement levels (though they should be if at all possible).

On a separate note, Adam Hewison just released a video entitled “How High Can Apple Go?” (alternatively titled – “Apple … Has it Bottomed?”

Hewison points out a possible Inverse Head and Shoulders (with price projection) and uses short-term Fibonacci retracements with an explanation on those key levels to watch.

Corey Rosenbloom
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