What a stunning (and deceptive) move in AMZN off the 181.59 (1) validation of support at the bottom of the Falling Wedge; (2) bottom of the Kumo (Cloud); and, (3) support near the neckline of the Bullish Inverse H&S pattern.
The June 16 close was just a hair below the neckline for a one-day "knuckle-biter" for The Bulls (leaving them wondering if the stock was going to tank), then ... LIFT OFF! The stock has made it all the way back to the top of the Falling Wedge, so that target has been MADE.
AMZN is a stock, among others, that the shorts love to hate, usually based on some opinion that they have of value. "This stock is a piece of junk." "This thing isn't worth yap ... yap ... yap ..."
There's a time to short ALL stocks, and there's nothing wrong with that, but we need to be very careful about getting stuck in some opinion of value. Expressing it during cocktail hour conversation is harmless and can be quite entertaining. Expressing our opinion of value by shorting a stock that is acting bullish, or by being long a stock that is acting bearish, can be deadly if we do it very often.
That June 16 low is a fine example of what many technicians call "a hook" in the trade. It "looks like" a failure, catching the majority of players "wrong-footed," then it rips to the upside.
The January 18 Bearish Wolfe Wave 5 "Fakeout/Breakout" to the upside is another example of "a hook" in the trade. The Bears "buy to cover" the upside technical breakout and The Bulls buy the technical breakout. The proverbial "everyone" is caught "wrong-footed," buying at exactly the wrong time, at a high in the stock. UGH.
What makes those "hooks" so difficult is that we get caught in our mindset, like at the June 16 low in AMZN, thinking, "This looks HORRIBLE." If we can clear our minds, watch what IS HAPPENING, and act on those "hooks," it can be very profitable.
I won't whine again that "they" didn't fill my order for 1,000 shares on June 16, at 181.75, because I should slap myself silly for not "paying up" when I saw AMZN rallying off that 181.59 "hook" at TRIPLE support: (1) bottom of the Falling Wedge; (2) bottom of the cloud; and, (3) Inverse H&S neckline.
How much evidence do you want?
Ouch! Ouch! Ouch! Stop that, Melf! OUCH! OUCH! OUCH!
2 comments:
Thanks, Melf. Very interesting. The "hook" is the same thing as a bear or bull trap . .right?
Mary
Good Morning, Mary,
Yes, pretty much. Sometimes the "hook" is just a little minor violation to the upside or downside, and not as obvious as a Big Ol' Bear or Bull Trap, but yes, it's exactly the same idea.
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