AMZN UPDATE

I've been trying to get to this one all week, might as well post it now.

 Looking at a 5 day chart, the change in character is obvious, as volume dropped over the last 4 years, volatility has increased, increasing volatility is one of the last things that you see before a top and decline.

 On a daily chart, through 2012 we have a double top of sorts, I have addressed these patterns numerous times, Technical Analysis teaches that the second top should fall short of the first and then drop, but Technical Analysis has been being used against traders for a good 10 years and more and more every year. The most common outlook for a double top is something like we have right now and then a breakout above the top's resistance range which creates a bull trap as bulls see this as a new breakout high and we usually see 3C dropping fast as smart money sells and sells short to retail. Often we can see this in advance of the breakout, many of our core short Q1 2012 trades were set up this exact way.

 The daily chart is hitting a new leading negative low below the accumulation of the 2009 lows, this gives us a pretty good clue as to what would happen if AMZN saw an upside breakout.

Although I plan to go in to detail in part 2 of "Understanding the Head Fake Move", essentially this traps retail longs, gives smart money shorts the best entry possible and when price drops the longs who are trapped at a loss begin to sell adding more supply to the market which in turn sends the stock down even faster, which brings in more shorts and provides more supply, etc. It's a cycle, it's a snowball effect.

I prefer to have a partial short in AMZN now in case we get a black swan event, but in my risk management BEFORE I ever enter the trade, I leave enough room to add to the position at the breakout highs, that is ultimately the best price, the lowest risk and as long as 3C looks the way it does now, the highest probability trade you can enter. If you are more patient you don't have to enter a partial position now, you can just wait for the set up, if it comes you have an incredible entry, if it doesn't, you didn't lose anything except some potential.

 The 60 min chart shows AMZN negative in the area.

 I didn't draw on this chart because it doesn't need it, this is a 15 min very long trend of 3C, note where 3C is now vs the last high of 2012, that should tell you something about what has been happening in AMZN this year.

 At 10 min AMZN has basically reached an in line status so we want to look at AMZN from the fastest charts now. We look at the longer charts for the strategic view and the shorter charts for the tactical entry, it's kind of like the longer charts are a decision to declare war on Iran and the shorter term charts are the war plan.

I now that's a weird analogy, I just saw Iran flash across the screen.

 The 2 min chart has a leading positive divergence, I didn't have to draw it in, it should be pretty obvious.

So does the 5 min chart and you know the 10 min is at reversion to the mean. You might have noticed this is very similar to the market charts and 90% of the time stocks move with the market.

In fact, the market has the most gravitational pull on any particular stock you might want to trade, the second most powerful influence is the Industry Group as they rotate in and out of favor. It may seem hard to believe, but the actual stock has the least influence, sure there are days when news or earnings are all that count, but we are speaking in terms of generalities.

So when looking for a trade, you are best off starting with the market, maybe doing a little Industry group analysis and then look for the specific stock that fits your market outlook. At that point work from long term charts to short term charts to analyze the stock and from short term charts to longer term charts to set up the entry.