Don't Ignore This Chart!

Apple Gets a Volatility Squeeze


Trading in Apple has turned dull over the last six weeks as the stock moves in a tightening consolidation. The volatility contraction can be seen by the Bollinger Bands, which contracted to their narrowest since October. Notice that BandWidth moved below 5%. Also notice that the October squeeze featured a head fake to the downside and then a sustained breakout to the upside. John Bollinger notes the following: "Typically what you'll see is a Squeeze, followed by a band tag, followed in turn by the real move". 

Apple is currently in the midst of the Squeeze and making a move towards the upper band. The head fake does not always happen, otherwise it would be too easy to trade. Apple is currently one of the strongest large-caps in our universe because its StockCharts Technical Rank (SCTR) is near 90, which puts it in the 90th percentile. Relative strength and the bigger uptrend suggest that the break will be to the upside. Should this breakout quickly fail, chartists should position for the head fake and watch for a downside break, which could become the real move. 

Arthur Hill
About the author: , CMT, is the Chief Technical Strategist at Focusing predominantly on US equities and ETFs, his systematic approach of identifying trend, finding signals within the trend, and setting key price levels has made him an esteemed market technician. Arthur has written articles for numerous financial publications including Barrons and Stocks & Commodities Magazine. In addition to his Chartered Market Technician (CMT) designation, he holds an MBA from the Cass Business School at City University in London. Learn More
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