i’m going to try to post this before the close but it might not make it. one of the reasons that i do not expect much, if any of a bounce on AAPL at this 120 min support area, which is the gap circled on this chart, is this: first of all, gaps act like magnets, often drawing prices to them when they are nearby. sometimes these gaps are filled (from below) or back-filled (from above) and sometimes prices that are in a downtrend will find support and bounce off the top of the gap (vice versa from prices trending higher and hitting the bottom of a gap from below).
what we have here is that gap that i’ve been targeting as S1, which as i type, i notice that we’ve now actually just hit about a minute or so before the close. therefore, basically my downside support target has been hit (to the exact penny, as often happens). normally, i would expect AAPL to bounce off the first drop to that support level but in this case, we have a very pronounced thin zone immediately below this level on the volume at price histogram, which i often reference as one of my favorite charting tools. had things been reversed, and AAPL had been falling in a thin zone up to this point (gap support), with some very large vol at price bars just below that support level, then i would have put very high odds on a bounce.
now of course i have nothing to gain and a whole lot of crow to eat if AAPL gaps up and rips higher tomorrow which, of course, is always possible. however, one of my main goals with this site is to avoid the all-to-common, after-the-fact 20/20 hindsight market analysis. personally, all the “see, you should have done this when that market did that… it was a no-brainer trade..” rubs me the wrong way if there was no previous mention of that “no brainer trade” before or at the time the trade should have been taken. not that i won’t occasionally point out something i missed, something i did right resulting in a nice trade, or a mistake i made if there’s a solid take-away from it but i have no desired to be a monday morning quarterback.
trading is all about probabilities and due to the reasons i’ve discussed above (plus a myriad of other factors affecting both AAPL and the broad markets), i would think that AAPL has a much better chance of going lower (to T1) before considerable higher. therefore, if i give back a lot of short-side profits on a gap and run tomorrow than that’s just part of the game but from experience, more often than not, a stock in a similar technical situation will continue lower until that thin zone is filled and the next support level (T1) is hit. these are some of the posts that i categorize in the educational section, which as it grows, i plan to organize these posts into various sub-categories.
