AMZN Update

The AMZN April $255 calls (riding the roller coaster to the top of the hill, but looking forward to the drop) plan seems to be working, I think it will work-as I usually remind members, this is really more about a short set up that we are waiting to come to us, we just happening to be rising that move that we want to come to us (short term long position to enter a long term short position-confusing enough?)

 AMZN's longer term trend (2-day chart)

 This is what I think is the head area of a larger H&S top pattern. If we get the entry around $270 or better, we have about 6% position risk, if you have a $20k portfolio and are using the 2% rule, then you have $400 risk money, at $274 where we'd like to get in or higher, that leaves less than $10 risk per share which is less than even the 6% position risk. That allows a 40 share position which is over half of your portfolio, I rarely want to risk more than 15% on any one position so no matter how you slice it, if you follow the risk management guidelines, the total portfolio risk on an AMZN short is less than 1% of the $20k.

 As for the lost art of volume analysis, volume is exceptionally important in identifying a true H&S pattern rather than something that looks like one which we saw a lot of traders fall for this in 2009 from May to July, they saw the price pattern but never bothered to confirm the volume and subsequently many of them were squeezed badly.

This is a custom cumulative volume indicator I wrote, you can create it by using this code, Yesterday's volume + today's volume, in PCF language that most Worden platforms use, if volume is lower today than yesterday the line will tick down, but this gives you a much easier way to conduct volume analysis.

A H&S should have the opposite volume pattern of what you normally want to see in a healthy stock, volume should be light on rallies and heavy on declines, the orange area is a lot of volatility so this looks right.

 Longer term 2 hour 3C shows areas of accumulation and distribution, note the last accumulation area was very small, those shares would have been distributed long ago which means the ugly leading negative divergence showing continued selling is more likely than not, short selling.

 The 30 min chart has a positive divergence that can get us to the gap area.

 The 15 min looks good in the base-like pattern.

 Here is that base-like pattern, it's the right size for a move of that caliber.

And the 1 min chart in the base is leading positive through its trend.

I think our call will do well and when the time comes, if you are interested, I think it will be a high probability/low risk entry.