Noel Campbell
Noel Campbell

Anyone who follows tech stocks in the US would be familiar with the big sell-off that has recently hit Apple (AAPL). This stock has been the darling of US investors for 10 years. When it came to Apple, it was a case of ‘What GFC?’ Now we are seeing a big shift in sentiment and the bears are out.

Chart 1 is the monthly swing chart for Apple. Reducing the scale of our analysis and forgetting W.D. Gann and David Bowden’s lessons about the importance of the monthly and weekly charts is something we must guard against. This chart is showing a clear ‘Overbalance in Price’ swing, indicating a potential change in trend signal.

Chart 1 – Apple (AAPL) Month Swing Chart – Overbalance in Price

click chart to enlarge

Apple is not part of the Dow Jones, which I’ve recently been following closely. Apple is the largest component of the NASDAQ 100 Index (NQ-SpotV) and this prompted me to take a closer look at what’s happening on that index. (I’m a stock index trader more than a follower of individual stocks).

What I found was very interesting. Firstly, the recent high on the NASDAQ was 21 September, one of our key seasonal Time by Degrees dates. Chart 2 is the daily bar chart for NQ-SpotV:

Chart 2 – NASDAQ 100 Composite Index Daily Bar Chart – 50% Danger Zone 21 September

click chart to enlarge

Stepping back and looking at the larger wave structure, there is a nice big picture ABC pattern that has the recent September high pushing against a 50% Danger Zone.

  • Point A:  9 August, 2011 at 1972.25
  • Point B:  3 April, 2012 at 2791.5
  • Reference Range:  819.25
  • Point C:  4 June, 2012 at 2434.25
  • 50% Danger Zone:  2434.25 + (819.25/2) = 2844
  • Point D:  21 September, 2012 at 2872.0

Repeating this approach but now using the 4 June to 21 September range as the A-B Reference Range and adding that range to the 16 November low, we can see that the market is quickly approaching this next 50% Danger Zone, as displayed in Chart 3 below:

Chart 3 – NASDAQ 100 Composite Index Daily Bar Chart – 50% Danger Zone 21 September

click chart to enlarge

I’m speculating about a potential change in trend forming here and the resultant opportunities on the short side of the market, using the last significant upside range (4 June to 21 September) to look for resistance on this current move up. The trade I’m preparing for on the short side is using 21 September as a big Point A, 16 November as Point B. The hunt is now on for the calculations to help pick Point C.

While I don’t have the space go into the contract details for the NASDAQ, I can assure you that the contract specifications are relatively straightforward, as they are for all stock indices. There are massive opportunities in trading index Futures and the low commissions make them very appealing compared to stock CFDs. If you are interested in learning more about stock index, commodity and currency Futures, please register for my Futures one-day online event in February next year.

I wish all Safety in the Market traders all the best for the festive season. May the holidays be joyous and safe for you and your families.

Until next year...

Noel Campbell
Professional Derivatives Trader