AAPL shares near very critical breakdown.

In this post I provided the model chart shown below.  It predicted that wave 2 up had completed and that the the shares were now headed down into wave 3 (or C - doesn't matter since they behave the same way).


Current chart is below.  The blue circle shows the first confirmation which is the throwover and then the break back down into the channel.  I have to say, that is a pretty wimpy throwover.  It does not suggest there is a lot of buying conviction at this level.  The chart then took a dump and then partially recovered just enough to back test the support-turned-resistance line from below.  It will likely turn out to be a "kiss good bye" (technical term from Bob Prechter).  The final portion of the subsequent down wave is playing out right at lower support.  The herd collectively sees these support and resistance lines that are invisible to so many individual traders who buy and sell on fake, easily manipulated "fundamentals" alone all the while discussing the "value" of stock as if stocks have any more real value than the dividend they pay.

In any case, it will likely take the power of a 3rd wave, nay a 3rd of a 3rd to break down below lower support for good.  So I expect the stock to rebound to 550 (the 38.2) 554 (the 50%) or 558 (the 61.8) before crashing back down below the lower support with shock and awe that only a 3rd of a 3rd wave can provide.  AAPL will likely not meet some aspect of earnings and the shares will get gut punched.  You have to be a real gambler to hold through earnings with this kind of technical setup IMVHO.

If this plays out in this way it will be bad for AAPL but also for the broader markets.  As the herd sees Apple's horse taken out back and shot for going lame in one leg, other investors will decide to get off their horses in other stocks so that they are not riding when those horses get shot.  Fear breeds fear in the herd and rightfully so at these margin-debt Ponzi-pumped valuations.

If this plays out as expected, it will goose the VXX finally.  I've been on bottom watch for that for some time and it has eluded me (but not gotten away from me, at least not yet).  I'm going to look for some AAPL Jan '15 $300 puts  AFTER we see a-b-c back up into 2 of 3.  I will probably buy them speculatively instead of waiting for the price of them go up after a break down of critical support in the share price.

If I'm wrong about all of this then the shares will break the top resistance line again and I will either not have bought yet or I will have just been holding for a couple days with the ability to sneak out the back door quietly for a small loss.  It's clearly an asymmetrical bet: if I lose, I lose small but if I win, it could be a 10 bagger.  My model says the AAPL Jan '15 300s will be in the money before they expire and they are currently going for a measly $1.75 per.  That is completely underpricing risk here.  That is too much faith in the Bernanke Put.  That is too many people making too much money too easily for too long selling puts and now they are complacent.  It's like they forgot that the stock was $700 only 16 months ago.

Time will tell for sure on this one.