Follow Mark On

Buy Mark's Book

and learn to day trade well using his decades of experience.

Buy Mark's Time

and get personalized instruction to do your best.

Trade Like Mark

by using the Hi-Tech mechanical trading system.

Learn From Mark

at his online trader training program.

AAPL Bearish Engulfing Candle: 7 reasons for the longs to be worried

Tuesday, 27 September 2011 18:05

On the bright side it is a very easy topic for me to blog about tonight, on the bad side AAPL may be ready to sell off and bring the broad markets with it. AAPL formed a Bearish Engulfing pattern today, which is a technical indicator, formed at the top of up trends and signals a potential for reversal.

The pattern occurs when in an up trend a stock opens above the previous days high and closes below the previous days low, therefore engulfing the entire range of the previous days trading.

This has been a very accurate pattern in relation to AAPL and has consistently led to lower prices. From April 2010 to today there has been a total of eight Bearish Engulfing Patterns on AAPL:

April 30, 2010 from $270.50, low was May 6, 2010 (flash crash) at $199.25. If you want to negate the flash crash, then the following day the stock traded to $225: RESULT –16.66% (using $225 low)
May 13, 2010 from $265, low was $231 on May 21, 2010: RESULT -12.5%
June 21, 2010 from $279 on July 19, 2010 low if $239.60: RESULT –14.33%
September 27, 2010 from $294.73 to a bottoming point at $277.77 on October 4, 2010: RESULT –5.76%
November 9, 2010 from $321.30 to a bottom of $297.76 on November 17, 2010: RESULT –7.47%
December 7, 2010 from $324 a higher high negated the signal on December 29, 2010 at $326.45, the only pattern that did not work: RESULT +.006%
March 7, 2011 from $361.67, bottoming on March 16, 2011 at $326.26: RESULT –9.70%
September 27, 2011 from $409.25…

The Bearish Engulfing Pattern has resulted in an average loss of 11.07% in AAPL and doing so with an average of 9 trading days, quick and painful. Most “market gurus” tell you to not try to pick tops and bottoms but if I have a trade that has worked 6 out of the last 7 times and resulted in an average savings of 11% while risking mere basis points, well these are odds that Jimmy The Greek would be proud of.