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Factor Update – July 31, 2016

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Apple (AAPL) – Head and Shoulders above the rest.

Apple (AAPL) – Head and Shoulders (Pattern) above the rest.

 

As a trader, my favorite chart configuration is the Head and Shoulders. The H&S pattern is easily recognizable (although for reasons I will not go into here, the novice chartist falsely finds the H&S form everywhere), produces far more reliable trading signals than more frequent patterns and is found at major turning points.

Apple has formed H&S patterns at many major turning points in recent years. The Factor has identified, alerted members and traded many of the following H&S patterns in real time.

Chart traders need to keep their eyes on Apple. The H&S pattern, when it occurs in Apple, is always worth a trade. Truly, Apple is head and shoulders above the rest.

Apple - $APPL H&S Head and Shoulders pattern Apple - $APPL H&S Head and Shoulders pattern Apple - $APPL H&S Head and Shoulders pattern Apple - $APPL H&S Head and Shoulders pattern Apple - $APPL H&S Head and Shoulders pattern Apple - $APPL H&S Head and Shoulders pattern Apple - $APPL H&S Head and Shoulders pattern

 

Factor trading tactics explained

Identifying a pattern is a relatively easy task in which to gain competence. Trading a pattern once identified – now that is a horse of a different color.

How many times have you heard another trader say (or said to yourself): “I knew that stock XYZ was going to go up, and it did, but I did not make a dime on the move?

Trade signaling, in my opinion, is far less important to net profitability than is proper trading tactics and aggressive risk management protocols.

Factor LLC, in its proprietary account, traded two of the H&S pattern featured herein as follows (adjusted for splits, not adjusted for commissions):

 

2015 H&S top sell signal

Shorted the close on Aug 3 at 116.68 with an initial risk to 122.31, or a risk of $5.63 per share. The target was

103.22. Factor risked 60 basis points on the trade (6/10th of 1%), or $6,000 per $1MM of trading capital. A 60 BP trade represented a 1,000 shares position (actual initial risk was $5,630 per $1MM).

The protective stop was moved to 116.82 after the close on Aug 21. Factor takes profits when targets are met. The target was exceed with a gap down open on Aug 24 at 93.98. Factor maintains open orders to take profits at target levels. The profit for the trade was

$22,700 or 227 BPs.

 

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2010 H&S top sell signal — then 2010 H&S failure buy signal

  • Shorted 2900 shares on the Aug 24 close at 31.71 with 60 BP risk to 33.71. Stopped out on the Sep 3 opening at 33.76 for loss of $5950 per $1MM, or 60
  • Factor considers the failure of a H&S top pattern to be a buy signal. Bought 2400 shares on Sep 3 at

34.24 with 60 BP risk to 31.79 and target of 40.79. AAPL reached target on Oct 15. The profit for the trade was $15,720 per $1MM or 157 BPs.

 

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plb

 

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Factor Update – April 9th

 

Factor Update - April 9th

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