2 blue chip stocks are consolidating in a key pattern: What will the breakup bring to Apple and Disney?

Apple Inc. AAPL and Walt Disney Co. SAY have developed inside bar patterns on the daily chart. An inside bar pattern indicates a period of consolidation and is usually followed by continued movement in the direction of the current trend.

An inside bar pattern has more validity over longer time frames, such as a four-hour chart. The model has a minimum of two candlesticks and consists of a parent bar (the first candlestick in the pattern) followed by one or more subsequent candles. The next candle(s) must be completely inside the parent bar’s range and each is called an “inside bar”.

A double or triple inside bar can be more powerful than a single inside bar. After the breakout of an inside bar pattern, traders want to watch for high volume to confirm that the pattern has been recognized.

  • Bullish traders will want to look for inside bar patterns on stocks that are in an uptrend. Some traders may take positions during the inside bar before the break while other aggressive traders will take positions after the pattern break.
  • For bearish traders, it will be essential to find an inside bar pattern on a security that is in a downtrend. Like bullish traders, bearish traders have two options to take a position to play the breakout of the pattern. For bearish traders, the pattern is invalidated if the stock breaks above the higher range of the parent candle.

See also: Disney is creating a hub focused on creating international content

The Apple chart: On Wednesday, Apple stock crashed from a bearish head and shoulders pattern called Tuesday. Thursday, the title consolidated its decline by printing an inside bar.

  • The inside bar was printed in low volume, confirming consolidation.
  • On Thursday, Apple attempted to regain the 50-day simple moving average as support and failed, indicating that longer-term sentiment is bearish.
  • The inside bar pattern is bearish because the stock was trading lower before forming it, but traders can watch a breakout of the pattern on Friday to gauge future direction.
  • Apple has upper resistance at $167.88 and $171.03 and lower support at $162.14 and $157.26.

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The Disney card: Disney was printing a double inside bar on Thursday, with the first inside bar printed on Wednesday and the mother bar on Tuesday. Disney consolidated its decline from January 14 where the stock fell about 2%.

  • Disney is likely to roll back to fill the gap range in the future, as the gaps on the charts fill about 90% of the time. Disney’s spread is between $152.06 and $155.17. The stock also has another higher range between $163 and $173.
  • Like Apple stock, Disney’s inside double bar pattern is bearish and the long upper wicks of the Wednesday and Thursday candles indicate that there are sellers above $151.
  • Disney has upper resistance at $153.88 and $160.90 and lower support at $147.85 and $141.70.


Photo: LendingMemo.com

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