Is the Completed Double Top on Apple the First Bearish Domino to Fall?

The FAAMGs (or whatever the current meme for big cap tech stocks supplying momentum to the broader market) appear to have lost their bullishness the past two trading sessions. For Apple, Inc. (AAPL​), that meant completing a relatively short and shallow double top price pattern. As bearish dominoes become poised to fall, what are the next key price levels, or dominoes, to watch out for?

Apple established a high at $156.65 on May 15, 2017 before falling back on significant volume to a low of $149.71 on May 17. It then proceeded to run back up near the prior peak to a high of $155.98. This type of retest of a prior high is the first part of a double top price pattern. These types of patterns indicate a change in trend from bullish to bearish, and have a price target based on the range from the initial high to the subsequent low minus the low price. The confirmation of the pattern is a close below the intervening low between the two equal highs. For Apple, that confirmation occurred on Jun 9 as it closed below support at $148.98. The difference between the initial high on May 15 and the subsequent low on May 17 is $6.94. The projected move based on the pattern is nearly $7 below the support at $149.71 for a target of $142.77. 

Apple achieved that price target quickly in today’s trading session before running higher to close at $145.42. Today’s price candle is slightly bullish given the long lower shadow, small body and small upper shadow. Price breakouts frequently retest the breakout level. In this case, that level is the low at $149.71.

Apple closed today near an area of support from the early April high. However, it also closed below its 61.8% Fibonacci retracement level of the short-term bullish move beginning on April 11 to the high on May 15. While Apple may find some short term support off of today’s low, the stock appears poised to fully retrace the trend and test the $140 low.

Looking forward, if Apple were to break support at $140 the next step is to look for significant retracement levels of the intermediate term bullish trend beginning with the November 14, 2016 low to the most recent highs. Key levels would be near the 38.2% Fibonacci retracement level and the 2015 highs near $135-$136, and the 61.8% retracement level near the November 2015 high near $124.

When price levels are breached traders look for the next price support levels as targets. The size of this initial move implies that those lower support targets may not be so difficult to reach in the near future.