PCLN And AMZN: Stop Busters

From yesterday morning on PCLN:

"Stop busters are (1) a takeout of the 169.00 high at Wave 5, and then (2) the top of pattern, which comes in today at 170.04, particularly a CLOSE above the latter."

Given the bullish chart and the momentum coming off the 21-day Kijun-sen (solid red line), I had a suspicion yesterday morning that they might try to bust some stops at the top of the pattern. They busted both 169.00 and 170.04 on an intraday basis, but not on a closing basis. I suspect that they hit the "hard stops" (Buy To Cover orders that actually were entered).

PCLN reversed into the close, so The Bears using a CLOSE above the pattern got a break, but they sure had a knuckle-biter on their hands, intraday.


Among my reasons for being suspicious about the stops in PCLN yesterday morning was the stop-busting action in AMZN a week ago. The Wave 5 Fakeout/Breakout on July 23 was a Bearish Island Reversal. Usually, those gaps don't get filled for awhile, if at all.

AMZN did have a significant selloff to the bottom of the pattern, but it held right there and came back in The Bears' faces. The bottom of the pattern was a good place to take at least some profits on short positions, especially when the stock held right there for three days, then rallied. There never are any guarantees with these things, and the rally off the bottom of the pattern is a great illustration of that.

The July 23 high was 94.40. The September 23 stop-busting high was 94.50. That sure looks like they busted some hard stops, given the fact that the takeout was just ten cents above the prior high.

The problem that The Bears have in AMZN is that yesterday's rally was the third move above the top of the pattern, and it also was the third CLOSE above the top of the pattern. The Bears are vulnerable to a squeeze here, especially if AMZN goes pounding through the 94.40-94.50 highs. They need to knock this back inside the channel.