The reason that I'm so picky about trendlines is because I want to know if they're valid, or not, in order to make a trading decision. We can connect ANY two data points and call that a trendline, but we don't know if it has any meaning unless/until Ms. Market confirms that it is valid with a third "hit" to the trendline. We don't always get that "third hit," but when we do, that's a piece of information for our "body of evidence."
Yesterday's "Gap And Crap" opening not only was a Bull Trap, the early high validated Blue trendline #2 - #4 to the exact penny. The slope of that trendline is -0.22875. Wednesday's high was 36.60, so the trendline came in yesterday at 86.3714. The session high was 86.37, so that trendline now is validated resistance. That doesn't mean that AMZN can't take it out to the upside. It just means that it "shouldn't," and if it does, it likely is going higher.
Wednesday's 36.60 high also established Data Point #4 for a possible Falling Wedge (in blue) with the Bear Flag (in purple) nested within it, as the chart stands. We know how these things can morph, so we'll see. Obviously, AMZN needs to take out the lows, and then the bottom of the pattern, but first...
... it needs to take out yesterday's 34.07 - 34.07 Double Bottom support in the 5-Minute chart.
My re-entry short at 34.55 was better than where I covered at 34.03 earlier in the week, but it wasn't a good entry. I got a little too enthusiastic after the Bull Trap opening, but I got a lot less enthusiastic when AMZN put in the Double Bottom at 34.07. The pattern in white is a Descending Triangle. The majority of those have a bearish resolution, particulary when the overall chart is bearish, but the market was holding up very well going into the final hour, so I threw it in near 3:00PM, suspecting a late day ramp-up.
The Descending Triangle did break out to the upside in the final hour. It's not a very strong pattern, but it was retested and held, so we'll see.
Gain on the re-entry: a little over $100. Total gain on the trade: $2,200.
3 comments:
melf, i see the falling wedge, but at the same time the stock is pushing itself down with the market towards the double bottom support...
would you think that if it breaks one, the other will soon go? (wedge & double bottom)
also, turning the subject, i see a H&S top forming on GS. coming from a rising wedge on the 3 month daily chart, it broke through the bottom support, and has been setting up the H&S, with both a left should and head complete and right shoulder well on its way. I have the neckline slightly increasing, currently at 159.25 give or take...
Kevin,
The 82.60 - 82.45 Double Bottom, which also is the bottom trendline of the Wedge, has a slight downward slope of -0.015, so subtract that amount each day to keep track of that trendline. It comes in today at 82.405. Monday, it will be at 82.39, etc.
If the Double Bottom breaks, the trendline "should" eventually go soon, too, but one never knows. It could get a bounce there.
Good eye on Goldman. The 21/34 RSIs went into Bearish Synchronicity yesterday, so that makes a print below yesterday's low of 162.61 (so, 162.60) a Sell Signal from that particular indicator. Given that the signal has shown up in a Right Shoulder of a putative H&S Top, that looks real decent.
The putative neckline has an upward slope of +0.14667, so add that amount each day to keep track of where the neckline is. It's at 159.590 today, so it will be at 159.590 + 0.14667 + 159.737 on Monday, etc.
Sorry to be so elementary about the slopes of trendlines, but I don't like to assume that everyone is familiar with it, and knows how to do it.
Sorry, Kevin, I gave you the wrong slope for that Goldman neckline. It's +0.1389, so it will come in on Monday at 159.706, not 159.737.
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