Here's the daily chart of AMZN, note how weak the bounce has been in the market, where a week ago the market would double the Euro pip/Dow Correlation, now it's lagging even the 1.0 correlation, a shift in the tone of the market, it's the little things that make a difference and that give away hints. In any case, AMZN popped a head fake above resistance, this is excellent for our purposes of shorting the stock, but it is also the reason that I don't like to short the first break of important support as we almost always see volatility around the area after. Yesterday also formed a hammer candlestick, which is a reversal candle, it carries no implications of strength or length, just that the current down trend was going to reverse the next day which it did, again this doesn't mean anything more then a 1 day reversal from the candlestick perspective.
We have reached our first target area and there's a second at the gap in white, making AMZN another candidate for a staggered entry.
Since the top, the Trend Channel has held the entire downtrend without a single false stop out, the current daily close stop is at $194.00
Our custom crossover screen used to prevent false whipsaw crossover signals worked excellent holding AMZN long for as long as possible and then giving all 3 signals for a short.
On an intraday 1 min 3C chart, it looks like there could be a little more upside intraday.
The 2 min chart is in perfect confirmation of the trend.
The 5 min chart is showing the weakness with a slight leading negative divergence in place today.
Longer term you can see all off the accumulation areas in white and distribution in red, the yellow boxes are head fake moves that almost always precede a reversal, there was even a small one for an upside reversal in November. This hart looks horrible and confirms AMZN rolling over from a top.
The worst though is the daily AMZN chart with a HUGE leading negative divergence. If you have a high risk tolerance like I do, you could short AMZN almost anywhere and still come out ahead. This is one of the worst daily 3C charts I've seen on an individual stock.
So make sure you take a look at AMZN and I would use any strength to initiate or add to the position. As I mentioned, a staggered entry makes sense here, at least you have some coverage in case things go south, but you leave some room to add at better prices as well. Remember, as long as this is your risk management plan BEFORE you enter the trade, you are not using the losing strategy of dollar cost averaging.
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