Wednesday, February 20, 2013

It's hard not to like AMZN Here (short)

I'm as far as I can go with AMZN, the position is filled out and it's right about here at an average of $269.09.

Here's why I like AMZN (Short) here...
 This is a substantial trend, it's not going to just roll without some decent top in my view... (weekly chart)

 Here's the daily chart, I'd say from the looks of 3C and a custom cumulative volume indicator, this looks a lot like the head of a H&S top. When playing an H&S top, I either want in near the top of the head or after the break of the neckline and a shakeout of the initial shorts that jumped in which would be a ways off still if the pattern were symmetrical, a stop can be put not too far above the recent highs and can certainly be positioned sized for a 2% portfolio loss or even 1% if you take on fewer shares.

 Here's where we are now on a daily vs where a stop might be placed, that's only about 7% with a stop at $290, you should be able to have a decent size position (although I prefer to stay around 15% of portfolio on the overall max position size) and still hold a -2% of portfolio risk plan.

 The bigger picture 2 hour 3C chart shows some accumulation to the far left, what looks to be a run from the neck line to the top of the head. As you can see, there's a substantial negative divergence.

There are a lot of charts in between, but looking at today's and recent intraday action, it looks like this is a negative divergence and likely a reasonable area to assume to be the top of a head. I think the risk / reward here is favorable as long as you use decent risk management.

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