Trading opportunities in Apple's chart

optionMONSTER

Apple's shares have presented interesting trading opportunities this week based on a very simple and effective trading pattern.

On the chart below, you can see where the Apple's price fell very quickly into session lows on Monday, Tuesday, and Wednesday, only to recover each time as buyers stepped in. I call this the "pinch trade."

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AAPL


A pinch trade presents itself when a previous downtrend on a 1- or 5-minute frame is breached to the upside after a steep and/or quick move down.

As AAPL fell below $524 yesterday afternoon it quickly recovered, forming a "W" pattern with the right-hand leg pushing up against the 1-minute downtrend at $526.50 when resistance failed to hold at $526.50. Buyers then jumped in, forcing short-sellers to cover their positions all the way up to $532.49.

A simple set-up could have paid $8.50 in about 30 minutes all by recognizing patterns from earlier in the week.

Nothing is a sure thing in trading, of course, but there is value in tracking patterns because they tend to repeat themselves. Acting on patterns before or as they develop is known as "scenario recognition."

Keeping a Rolodex of them in your head can greatly increase your speed at recognizing one when it emerges, allowing you to enter or exit a trade at the precise moment where profits are maximized.

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