SPX, SDS And AMZN

From April 15:

"The rally off the March 9 low sure has the look of a Bearish Wolfe Wave."

It was. The target line (#6) came in yesterday at 831.82. The low in the SPX was just above it, at 832.39. The slope of the target line is -1.254, so it will come in today at 830.57, but for all intents and purposes, the target has been MADE, within a half a point. Next objective for The Bears is the bottom of the Wolfe Wave at Blue #2, SPX 814.53.


Off Friday's trendline validation at the bottom of the Bullish Wedge, the SDS gapped higher at the top of the pattern, broke out, and kept pumping to the upside.

As we've seen so often, wedges are notorious for morphing into H&S patterns, or into Ascending/Descending triangles. A Bullish Inverse H&S pattern is a possibility here (pattern in red), and structurally, it would add some strength to the chart. "The bigger the base...the better the breakout." We also often have seen how well "nested" patterns and multiple patterns can perform when they break out, or break down.



I was flat at the open looking for an opportunity on the short side, given the downside gap opening. I wanted the SDS at 66.89 on the 50% retracement of the opening gap, but didn't get it. The low was only 67.17.

Before the open, Citi upgraded AMZN, and it was called higher while the general market was called lower. I knew that AMZN had just completed a Bearish Wolfe Wave, so I had a quick peep at the chart. AMZN was rallying back to the bottom of the Wolfe Wave, which came in yesterday at 79.39. Since the market was down hard, I entered an order to short it below that, at 79.15, thinking that it might not rally that much.

NO SHARES AVAILABLE TO SHORT at Scottrade again. Grrr-r-r... Fortunately, I was able to short it at TDAmeritrade.

AMZN turned out to be stronger than I expected. It rallied back above the broken Bearish Wolfe Wave, to 79.79, and I thought that I was going to get stopped out above 80.00, the recent high (I was using a mental stop of 80.20, to avoid getting shaken out).

When this little H&S Top showed up and broke down, it put a short-term downside target of 78.34 IN PLAY. Given the early morning strength that AMZN showed, I covered at 78.35 and re-entered an order to short it again at 79.03 on a rally back to the broken neckline of this H&S Top. I didn't get the rally, and the order wasn't filled. AMZN finished down with the rest of the market.

That strategy is what I described to Mark last week in the Comment Section as "jockeying for postion." If I had gotten filled on the re-entry and then got stopped out, the loss on the two trades would have been about $300. On the other hand, if I had gotten filled on a failed retest on the H&S neckline and AMZN sold off again, I stood to gain much more than that. The risk:reward would have been stacked heavily in my favor.

That strategy worked well in my QID trade last week. It didn't work yesterday.

Gain: $800